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The pursuit of low-risk returns has become a consensus among the vast majority of institutions.

Author | RAYYYY

Editor | Xiaobai

The second quarter reports of public funds have basically surfaced, and a blueprint for market fluctuations that may affect investors' investment strategy adjustments and outlooks has also been presented to investors.

Prior to this article, the Market Capitalization Fund Department has released a number of research opinions based on the second quarter report. Those who are interested can scan the following QR code to view the details.

(Source: Market Capitalization APP)

A-shares fluctuated in the second quarter of 2024. The positive signals released by the Political Bureau of the Central Committee at the end of April and the intensive introduction of real estate policies pushed the major A-share indexes to a new high for the year. However, the subsequent economic recovery was less than expected, coupled with the disturbance of external factors, the market index continued to decline.

(Source: Market Capitalization APP)

Today, we have finally bid farewell to the “3000-point defense battle” and launched the “2900-point defense battle”.

Overall, in the second quarter of 2024, public funds continued the development trend of the first quarter. While the total asset size of public funds increased, the size and positions of active equity funds continued to decline.

At the same time, fund institutions are significantly increasing their allocations to Hong Kong stocks, and ETFs remain popular. The proportion of technology and electronics has further increased, and a group trend has initially formed. The group of consumption, medicine, and new energy has further disintegrated, and the proportion has continued to decline.

Fund sizes increase and decrease, Hong Kong stocks show more value (I) Following the trend of the first quarter, the scale of active equity funds continued to decline in the second quarter

Choice data shows that in the first quarter, the Shanghai Composite Index rose 2.2%, the CSI 300 Index rose 3.1%, the total scale of public funds climbed to 29.3 trillion yuan, and the scale of active equity funds reached 3.5 trillion yuan, a decrease of 244.94 billion yuan from the fourth quarter of 2023.

In the second quarter, various types of funds continued the trend of the first quarter. In the second quarter of 2024, the stock market fell overall, and the CSI 300 Index fell by 2.14%.The total scale of public funds has increased instead of decreased. The latest scale of public funds is 31.02 trillion yuan, a month-on-month increase of 5.8% from the first quarter of 2024.

Among them, the fund size after excluding money market funds was 17.84 trillion yuan, a quarterly increase of 6.31%.

(Source: Choice data, produced by Market Capitalization App)

In terms of the proportion of the total market size of public funds, money market funds continued to maintain the highest proportion in the second quarter of 2024, with the latest proportion of 42.48%; followed by bond funds, with a proportion of 34.08%;The proportion of stock funds fell slightly to 10.05%.

As before, the size of active equity funds continued to decline slightly. In the second quarter of 2024, the size of active equity funds was 3.43 trillion yuan, a decrease of 143.69 billion yuan from the first quarter of 2024, and the number was 3,879.

There are 73 newly issued funds in the active equity fund pool, with 22.474 billion newly issued shares, which is a decrease compared with the first quarter of 2024.

(Source: Choice data, produced by Market Capitalization App)

(II) Hong Kong stocks are more valuable in the eyes of fund managers

It is worth noting that although the scale of active equity funds has continued to decline, Hong Kong stocks have been significantly increased by fund institutions. Choice data shows that the scale of Hong Kong stock holdings in active equity funds in the second quarter of 2024 was 186.662 billion yuan, an increase of 21.72% from the first quarter of 2024.

(Source: Kaiyuan Securities Research Institute)

This means that in the context of the Federal Reserve stopping interest rate hikes and unclear expectations for rate cuts, as well as continued outflow of foreign capital, Hong Kong stock assets have shown systematic undervaluation characteristics in the past few years. In the second quarter of this year, some Hong Kong equity assets finally reflected their returns, showing a relatively high allocation value, thereby attracting capital inflows.

For example, the representative Hang Seng ETF (159920.SZ) rose 8.85% in the second quarter of this year, significantly outperforming the CSI 300 Index.

(Source: Market Capitalization APP)

The outstanding performance of Hong Kong stocks has made many fund managers reserved about the future of A-shares. They believe that the investment value of Hong Kong stocks far exceeds that of A-shares at this stage.

From an industry perspective, the top three industries in which the Mainland-Hong Kong Connect Fund had heavy holdings in Hong Kong stocks in the second quarter of 2024 were information technology, energy, and non-essential consumer goods.

In terms of the scale of heavy holdings, the scale of heavy holdings in the information technology industry, energy industry, and non-essential consumption increased by 31.52%, 12.11%, and 7.33%, respectively, compared with the first quarter of 2024.

Excluding fluctuations caused by market value, the information technology industry saw an active increase in holdings of 6.69%, while essential consumption saw an active reduction of 0.85%, making it the only industry to see a reduction in holdings.

(Source: Choice data, produced by Market Capitalization App)

Looking at specific companies, the top ten Hong Kong stocks heavily held by the Mainland-Hong Kong Connect Fund are Tencent Holdings (00700.HK), China National Offshore Oil Corporation (00883.HK), Meituan-W (03690.HK), China Mobile (00941.HK), Kuaishou-W (01024.HK), Xiaomi Group-W (01810.HK), Hong Kong Exchanges and Clearing (00388.HK), etc., covering information technology, energy, discretionary consumption, telecommunications services, finance and other fields.

(Source: Choice data, produced by Market Capitalization App)

Among them, Tencent Holdings, Meituan-W, China Mobile, Xiaomi Group-W, and Innovent Biologics received increased holdings from the Mainland-Hong Kong Stock Connect Fund in the second quarter.

Overall, the Hong Kong stock market has experienced a decline in the past few years, and the overall valuation level is already low, and it has strong investment appeal. From a long-term investment perspective, industries such as information technology, discretionary consumption, and utilities are in a relatively good investment position.

ETF scale hits new high, dividend ETF is popular 1. ETF scale continues to rise

In the second quarter of 2024, the total scale of ETFs reached 2.47 trillion yuan, and the scale of non-monetary ETFs reached 2.29 trillion yuan, setting a new record.

ETFs have developed rapidly in the past three years. In the second quarter of 2024, the overall ETF scale increased by 97% compared with three years ago, with an average quarterly growth rate of 13.75%.

(Source: Kaiyuan Securities Research Institute)

(Source: Choice data, produced by Market Capitalization App)

In terms of absolute value, stock ETFs grew the most, with a net increase of 43 stock ETFs in the second quarter and a net increase of 90.5 billion shares.

Bond ETFs and commodity ETFs also saw net increases in holdings, with their shares increasing by 54.87% and 33.87% respectively in the second quarter.

The shares of currency ETFs and cross-border ETFs decreased, by 2.41% and 1.75% respectively.

(Source: Choice data, produced by Market Capitalization App)

In the second quarter, ETFs in the fields of healthcare, real estate, etc. were very popular with market funds, and all of the above fields have certain policy preference attributes.

In addition, broad-based ETFs, such as the CSI A50 ETF and the CSI 300 ETF, continue to receive large amounts of buying, which may have a lot to do with the allocation needs of institutions such as Central Huijin Investment, insurance, and private equity.

Among them, the shares of two medical and health-themed ETFs, Medical ETF (512170.SH) and Pharmaceutical ETF (512010.SH), increased by 6.55 billion and 4.505 billion respectively, ranking at the forefront of the ETF market.

(Source: Choice data, produced by Market Capitalization App)

2. Dividend ETFs are popular

In addition, dividend-yielding assets, which have been sought after by the public recently, have also become the main target for public funds to increase their holdings.

The allocation ratio of central enterprises increased significantly from 15.4% to 17.2%, and the positions of CSI dividend stocks increased from 5.1% to 5.6%.

(Source: CICC)

It is worth noting that the dividend strategy, which was originally more resistant to declines, has been falling since late May and is in a typical downward channel.

Taking the Dacheng CSI Dividend Index (007801.OF) as an example, it has fallen by as much as 7.6% in the past month, wiping out nearly half of its gains in the past two years.

(Source: Market Capitalization APP)

However, with high dividends as a safety cushion, this round of decline may provide interested investors with a better opportunity to intervene. Interested investors can scan the following QR code to browse.

(Source: Market Capitalization APP)

Fund managers embrace technology and believe in the future; the Matthew effect continues to work 1. Abandon consumption and embrace technology

Judging from the fund managers' movements in the second quarter, managers are abandoning consumption and embracing technology.

In the second quarter of 2024, the stocks heavily held by active equity funds were mainly distributed in the manufacturing, consumption, and technology sectors. Among them, the proportion of the technology sector increased by 3.4 percentage points compared with the previous quarter, and the proportion of the consumption sector decreased by 3.79 percentage points, the largest among all industries. There was also a slight reduction in the proportion of the pharmaceutical sector.

(Source: Choice data, produced by Market Capitalization App)

Focusing on technology over consumption means that fund managers are abandoning traditional A-share core assets such as liquor, consumption, and medicine, and choosing to pursue assets with more imagination.

(II) The Matthew Effect of Top Fund Managers is Obvious

As the second quarter reports of 2024 of public funds are gradually disclosed, the investment trends of star fund managers are exposed one by one.

On July 18, Zhang Kun's fund also disclosed its second quarter report. From the overall position, Zhang Kun's stock position is basically stable, and E Fund Blue Chip Select Mixed (005827.OF), E Fund High Quality Enterprise Three-Year Holding (009342.OF), and E Fund High Quality Select (11011.OF) have not changed much overall.

However, E Fund Asia Select Equity (QDII) (118001.OF) has some highlights, with the addition of two "new faces" - Samsung Electronics and Futu Holdings.

(Source: Choice data, produced by Market Capitalization App)

Zhang Kun said in the second quarter report that he disagreed with the current pessimistic market outlook. He said that the market's pessimistic outlook may be based on concerns about stagnation, which he strongly disagreed with.

In his view, the domestic economy is still a fertile ground. Considering the proportion of household consumption in the economy, the investment opportunities brought about by economic development and the improvement of people's living standards are still one of the most promising "gold mines" in the stock market in the long run.

The optimistic Zhang Kun is still the fund manager with the largest management scale of active equity funds in the entire market, with the scale of public funds under management reaching 61.681 billion yuan.

Liu Yanchun, Ge Lan, Xiao Nan and Xie Zhiyu ranked second to fifth respectively in terms of management scale, with management scale reaching 45.354 billion yuan, 40.765 billion yuan, 36.923 billion yuan and 35.71 billion yuan respectively.

(Source: Choice data, produced by Market Capitalization App)

It is worth noting that the management scale of fund managers still shows a relatively obvious Matthew effect, where the strong get stronger.

As of the end of the second quarter, in the equity category, the total management scale of the top 10, top 20 and top 50 active fund managers exceeded 380 billion, 630 billion and 1.15 trillion respectively.

Based on the total size of active equity funds of 3.43 trillion yuan in the second quarter, the top 10 and top 50 active equity fund managers managed a total size of more than 10% and half of the total size respectively.

It is no exaggeration to describe the current public fund market as "chaotic". While the total scale continues to create new highs, the scale of active equity funds is shrinking. Many fund managers are keeping their feet on the A-share market and looking overseas, continuously increasing their allocation to Hong Kong stocks or overseas stocks, while fund managers without the conditions are chasing dividends.

Behind this extreme phenomenon is the market's vote of no confidence in the current macroeconomic outlook.

The current market consensus is that in the current economic environment, although many clear stimulus policies have been introduced and it is certain that more stimulus policies will be introduced in the future, there is still a lack of confidence in whether these policies can alleviate the economic downturn, and the investor group shows extremely high risk aversion.

Looking ahead, although fund managers have their own differences, most of them agree that the current market structure is quite divided, especially in terms of dividend and growth stocks. With the support of mysterious funds, the downside risk of the market is relatively controllable, but the upside is still uncertain and it is difficult to have a big market. We can only look for structural opportunities.

Conservative investment has become the main idea of ​​current public fund managers, and it is too early to discuss the shift now.

As Guo Jun of Bosera Fund believes, an economic shift similar to real estate adjustment will basically take 3-5 years. It is too early to discuss the shift now. In the case that the economic growth rate in the second quarter is lower than 5%, we must be prepared for the sudden introduction of relevant stimulus policies.

Disclaimer: This report (article) is an independent third-party research based on the public company attributes of listed companies and the information disclosed by listed companies in accordance with their legal obligations (including but not limited to interim announcements, regular reports and official interactive platforms, etc.). Market Capitalization strives to be objective and fair in the content and views contained in the report (article), but does not guarantee its accuracy, completeness, timeliness, etc. The information or opinions expressed in this report (article) do not constitute any investment advice, and Market Capitalization shall not bear any responsibility for any actions taken as a result of using this report.

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