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Many broad-based ETFs saw large trading volumes in late trading.

Two weeks later, A-shares experienced a sharp fluctuation again. On August 20, nearly 4,600 stocks fell, the Shanghai and Shenzhen stock markets fluctuated and corrected, and the market turnover was less than 600 billion yuan, with insufficient trading momentum.

In the late trading, the trading volumes of many broad-based ETFs increased, such as Huatai-PineBridge CSI 300 ETF, E Fund CSI 300 ETF, Hua Xia SSE 50 ETF, and Southern CSI 1000 ETF. The trading volumes have increased significantly compared with the recent period, which may be due to the incremental funds supporting the overall market index. The A-share index narrowed its decline in the late trading.

The total transaction volume of multiple broad-based ETFs increased by more than 10 billion yuan

At the end of trading on August 20, many ETFs tracking broad-based indexes such as the CSI 300 Index, SSE 50, and CSI 1000 ETF saw large trading volumes.

The latest scale of Huatai-PineBridge CSI 300 ETF, E Fund CSI 300 ETF, Hua Xia CSI 300 ETF and Harvest CSI 300 ETF all exceed 100 billion yuan. They are the top-ranking equity ETFs in China and the four largest broad-based ETFs tracking the CSI 300 Index.

As of the close of August 20, the total transaction volume of the four CSI 300 ETFs reached 11.053 billion yuan, a significant increase from 3.919 billion yuan on the previous trading day and 2.82 times yesterday's transaction volume.

Huatai-PineBridge CSI 300 ETF had the highest trading volume of 5.42 billion yuan, while E Fund CSI 300 ETF had a trading volume of 2.849 billion yuan. The trading volumes of Hua Xia CSI 300 ETF and Harvest CSI 300 ETF both exceeded 1 billion yuan.

In addition to the ETFs tracking the CSI 300 Index, the daily trading volume of Huaxia SSE 50 ETF, Southern CSI 1000 ETF and Huaxia CSI 1000 ETF all doubled compared with the previous day. Specifically, the daily trading volume of Huaxia SSE 50 ETF was 2.635 billion yuan, a significant increase from 1.119 billion yuan on the previous trading day. The two ETFs tracking the small and medium-sized index CSI 1000 Index, Southern CSI 1000 ETF and Huaxia CSI 1000 ETF, both had trading volumes of over 1 billion yuan, while their trading volumes on the previous trading day were 643 million yuan and 324 million yuan respectively.

The trading volume of 7 broad-based ETFs increased by 10.325 billion yuan compared with the previous day. Market participants believe that this may be the incremental funds using broad-based ETFs to support A-shares, which will help stabilize the A-share index. At the end of August 20, the decline of the A-share index narrowed.

Incremental funds support A-shares through broad-based ETFs

Since the beginning of this year, the scale of broad-based ETFs has continued to grow and is considered to be the main source of incremental funds for A-shares this year.

Wind data shows that since August, a number of broad-based ETFs tracking the CSI 300 Index, SSE 50 Index and CSI 1000 Index have continued to receive net subscription funds. The scale of broad-based ETFs including Huatai-PineBridge CSI 300 ETF, E Fund CSI 300 ETF, Hua Xia SSE 50 ETF, Hua Xia CSI 300 ETF, Southern CSI 1000 ETF, Harvest CSI 300 ETF and Hua Xia CSI 1000 ETF have repeatedly set new historical highs.

Recently, although funds have been used to support A-shares through ETFs, market sentiment is sluggish and fund risk appetite is at a relatively low level. Boshi Fund believes that the current policy side still continues to serve the tone of stabilizing growth. As the effects of subsequent policies gradually emerge, we may be more optimistic about the subsequent performance of the economy. The market expects the Federal Reserve to start cutting interest rates in September, and the impact of overseas uncertainties on A-shares will gradually weaken. The subsequent trend of A-shares will still be more affected by domestic factors. In the short term, A-shares may continue to consolidate, and high dividend and bonus sectors may be more favored by funds.

As for the specific reasons, China Europe Fund said that the domestic market has recently shown defensiveness compared with overseas markets. China's economic data in July, including real estate and exports, remain to be observed. In an environment where the risk of overseas market volatility still exists, foreign capital has not chosen to flow into the domestic market with relatively low valuations. For A-shares, the challenges that still need to be solved in economic fundamentals may be a test in the second half of the year.

Last week, the capital structure of the market performed poorly, and northbound funds continued to flow out. Morgan Stanley Funds analyzed that although overseas markets rebounded sharply, their sentiment towards A-shares remained, and investors were still nervous, causing the transaction volume to fall to a new low this year. ETFs are almost the only source of incremental funds.

Market style switching is expected to start

Since the second half of the year, global markets have been volatile, with multiple factors resonating and disturbing market sentiment. A-shares have been more sensitive, and their recent performance has been inferior to that of the first half of the year and overseas markets during the same period.

With the approach of the US interest rate cut, China Europe Fund believes that the market style and structure are expected to switch, and the risk appetite of the domestic market is expected to continue to rise. However, due to the recent sluggish market trading, investors may not be sensitive to the recovery of risk appetite. In the context of a flat economy and no total stimulus policy, the domestic stock market is expected to continue to be dominated by structural market conditions, and the index's rebound height may be limited. The short-term performance of the structural market will be reflected in the convergence of sector valuation differences.

Recently, the US and Japanese stocks have completely recovered from the impact of recession concerns and carry trade liquidation. Morgan Stanley Funds analyzed that the market needs to be driven by fundamentals for further upward movement. Although the US retail data in July performed better than expected, the US economic data may fall slowly in the general trend. The expectation of interest rate cuts is fluctuating repeatedly, and the possibility of preventive interest rate cuts is high. The employment data in the next few months is expected to show a seasonal downward trend, which creates good conditions for the Fed to cut interest rates. Therefore, interest rate cut trading in the A-share market is expected to remain a relatively effective strategy. There will be more than one month of performance vacuum after the mid-year report. It is expected that the market focus will turn to domestic countercyclical adjustment policies and overseas monetary policies, and the probability of a market rebound will also increase.

Looking ahead, China Merchants Fund pointed out that the recent rapid decline in market trading volume shows that negative factors are fully priced in. In addition, as the window period of stable growth in September and October is approaching, market sentiment may stabilize and drive a short-term stock market rebound. However, the medium-term market is still constrained by weak economic demand. Before there are sufficiently positive changes in expectations, the overall stock market is expected to remain volatile. Investment will continue to focus on dividend stocks with relatively low risk characteristics and undervalued growth stocks with intensive policy industry catalysis.

"The domestic economic recovery is weak and market confidence needs to be restored, which still restricts the pace of capital replenishment." Hang Seng Qianhai Fund said that the short-term market may fluctuate, and high-low cutting is still a structural clue. Considering the disturbance in the external market, maintaining positions to observe risks is still the first choice. Domestically, the actual policy implementation needs to be further clarified, which may play a leading role in some industries.

In terms of specific sectors, China Europe Fund believes that the sectors that benefit from the structural switching in the short-term market rebound are mainly oversold and undervalued sectors, especially the real estate and other core industries that benefit from subsequent policy stimulus; the second is the rebound opportunity after the oversold domestic demand sector; the third is the growth main line such as technological independence and the fruit chain. In the medium and long term, with the gradual disclosure of financial reports, the new quality productivity main line that conforms to the new "National Nine Articles" guiding ideology, high ROE companies and industries with ROE improvement space are expected to receive further attention from the market.

From an industry perspective, Morgan Stanley Fund is optimistic about some areas that will benefit from the Fed's interest rate cuts, such as innovative drugs and gold. It also believes that areas with stable fundamentals and policy support, such as home appliances and utilities, will maintain good relative returns. In the medium term, it will continue to focus on semiconductors and military industry where business conditions have improved.

In terms of allocation, Hang Seng Qianhai Fund believes that the defensive direction is still to choose high-dividend, low-valuation dividends, while the offensive direction focuses on the improvement of the bottom consumer sector and the rise of a new round of industrial cycles, mainly technology growth and large manufacturing sectors.

Editor: Yang Yucheng

Proofreading: Su Huanwen

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