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qfii's enthusiasm for investing in a-shares continues to rise.

since qfii officially entered the a-share market in 2003, it has become an important investment force in the a-share market after more than 20 years of development. the market value of its holdings has increased from over 2.8 billion yuan in 2004 to over 100 billion yuan at the end of the first half of this year. at different stages, qfii's investment focus has varied, from the initial traditional industries to the latest technology directions represented by medicine and electronics.

since entering the market, qfii's holdings have achieved very impressive returns, and its overall cumulative returns over the past 20 years have far outperformed the overall market. this article summarizes qfii's investment logic through multiple dimensions such as qfii's holdings changes, return comparisons, and key holdings.

on july 9, 2003, ubs completed the first purchase of a-shares by foreign investors through the qualified foreign institutional investors (qfii) mechanism, marking a historic event in which qfii officially participated in the chinese stock market, thus opening up my country's capital market to the outside world. over the past 21 years, qfii has become one of the symbols of china's capital market's increased openness to the outside world. it is considered the most effective channel for foreign funds to legally and compliantly enter the chinese mainland capital market and an important category of cross-border financial business.

in 2003, qfii institutions officially entered the market, and a total of 11 foreign institutions obtained qfii qualifications that year. with the lowering of entry barriers, the expansion of investment scope, and the continuous improvement of supervision, the number of qualified foreign investors has increased significantly. this year, 36 foreign institutions have been approved for qfii qualifications, including middle eastern sovereign wealth funds such as the oman investment authority, as well as overseas pension giants such as the uk pension fund board.

as of the end of june this year, there were 839 qfii institutions (including rqfii institutions) in the market. wind data shows that there are 10 institutions with the latest quota exceeding us$2 billion, namely the monetary authority of macao, abu dhabi investment authority, bank of korea, societe generale sa, barclays bank ltd., kuwait investment authority, etc.

as the number of institutions surged, qfii's enthusiasm for investing in a-shares continued to heat up. as of the end of the second quarter of this year, qfii held a total of 1,084 heavily-weighted stocks with a market value of 101.4 billion yuan. this is a 34-fold increase from 2.862 billion yuan in 2004. at the end of 2021, the market value of qfii's heavily-weighted stocks once reached 238.221 billion yuan, the largest scale since the opening of qfii, an increase of more than 82 times from 2004.

the focus of configuration shifts to the technology track

in terms of sector allocation, the market value of qfii's latest holdings in the main board has fallen to 59%, while holdings in the chinext and science and technology innovation board have increased to 41%. before 2017, qfii's heavy holdings were mainly concentrated in the main board, accounting for more than 85%; since 2018, the proportion of qfii's holdings in the main board has continued to decline, and the proportions at the end of 2023 and the first half of 2024 were both 59%. the proportion of holdings in the science and technology innovation board and chinext has increased from less than 20% in the past to the latest 41%, and the scale of holdings has doubled.

as "smart money", qfiis have different holding strategies in different periods of economic development. from 2003 to 2008, china's economy grew rapidly, and resource and cyclical industries performed relatively well. during this period, qfiis allocated more cyclical industries. from 2009 to 2017, under the catalysis of multiple factors such as supply-side reform and consumption upgrading, domestic consumer demand was strong, and a-share consumer stocks performed well. qfii's heavy holdings shifted to consumer industries. in 2009, food and beverages became the second largest industry for qfii. from 2016 to 2017, qfii's holdings in food and beverages further increased, replacing banks and becoming the largest industry for qfii. from 2018 to 2022, the valuation of the consumer industry was high, and some qfiis chose to cash in and leave the market. the proportion of allocations gradually declined, and the banking sector returned to the largest industry. the direction of technological innovation represented by the pharmaceutical, biological, and electronic industries has become the new focus of qfii allocation in recent years.

as of the end of the first half of this year, the top three industries with qfii's largest holdings were banking, electronics, and mechanical equipment, with shareholding market value accounting for 50.13%, 10.14% and 4.42% respectively. among them, the holdings of the banking and electronics industries have increased significantly compared with the end of 2023.

investment returns significantly exceed the market

since entering the market, although qfii has not achieved positive returns every year, its profitability is outstanding. it is regarded as one of the investment indicators of the a-share market and is also seen as a representative of overseas "smart money".

judging from the wind qfii heavy holdings index, since 2019, the index has risen by 86.02% in total, with the highest increase in the range being nearly 190%. during the same period, the csi 300 index has risen by 6.15% and the shanghai composite index has risen by 9.86%.

judging from the market conditions between 2004 and 2018, qfii was basically profitable during the above-mentioned years, as the overall market experienced two bull markets and major stock indexes all achieved substantial increases.

after the market value of qfii holdings hit a record high in 2021, the market value of holdings has been declining for two consecutive years, but from the perspective of the average annual increase or decrease, the yield of qfii holdings is still stronger than the market. in 2022, the shanghai composite index fell by 15.13%, and qfii's heavy holdings rose by an average of 3.68%; in 2023, the shanghai composite index fell by 3.7%, and qfii's heavy holdings rose by an average of 21.06%. this shows that the yield of qfii holdings significantly exceeds the market.

the holding period is proportional to the profit level

from the perspective of the return level of each qfii institution since entering the market, the longer the holding period, the higher the profit. since there were only three qfii institutions entering the market in 2003 and the holding period at the end of the year was less than half a year, this article takes 2004 as the starting point for observing the return level. due to the lack of position building data, this article assumes that the assets at the beginning of 2004 are the starting point and calculates the increase or decrease of assets in the year based on the average increase or decrease of the heavily held stocks at the end of each year. at the same time, the newly listed stocks that the qfii held for less than one year are excluded.

for example, if the stocks held by a qfii rose by an average of 40% in 2005 and 20% in 2006, the formula for calculating the cumulative rate of return over the two years is (1.4*1.2-1)*100%, and the final value is 68%.

it is worth noting that this indicator only measures the investment ability of qfii, not its actual shareholding return rate.

from the perspective of the returns of individual qfiis with different holding periods, there are 31 qfiis with holding periods of more than 10 years, and only one of them did not achieve positive returns. the other 30 qfiis all achieved positive returns, with an average return rate of up to 18.79 times. in the grouped data of holding periods of 5 to 10 years (inclusive) and 2 to 5 years (inclusive), 15.38% and 50% of qfiis respectively had negative cumulative returns, that is, the investment did not make a profit. this indirectly reflects that the longer the qfii holds shares, the higher the possibility of achieving a positive investment return rate.

17 institutions have a cumulative return rate of more than 10 times

there are six qfiis with the longest time in the market, namely, ubs, merrill lynch, bill & melinda gates trust, hsbc, morgan stanley, and goldman sachs, all of which have invested in a-shares for more than 20 years. their average cumulative return since entering the market is as high as 35.27 times. among them, the highest return is ubs group, with a cumulative return of 74.63 times in the 21 years since entering the market.

according to the statistics of the cumulative rate of return since entering the market, 17 qfii institutions have achieved a rate of return of more than 10 times. jpmorgan chase bank has always maintained a leading position in the world in terms of wealth management scale and profitability. since entering the market in 2005, it has continuously invested in a-shares for 19 years, with a cumulative rate of return of 92.73 times. during these 19 years, the average increase of its holdings exceeded 100% in 3 years, and even reached 240.73% in 2007, which shows its extraordinary stock selection ability.

according to databao statistics, jpmorgan chase bank has held a total of 40 stocks at the end of each year (excluding new stocks held for less than one year and stocks that appear in quarterly reports but not in annual reports). according to the average annual increase or decrease during the holding period, 75% of the stocks have brought positive returns to jpmorgan chase bank. jpmorgan chase bank has held cement concept stock wan nian qing for the longest time, reaching 7 years. from 2007 to 2013, the cumulative increase in wan nian qing's stock price was 199.28%.

deutsche bank has been investing in a-shares for 17 years since entering the market in 2003, with a cumulative return rate of 86.84 times, second only to jpmorgan chase. in addition, the cumulative returns of qfii institutions such as ubs and merrill lynch are at the top.

firmly hold 23 stable high-growth stocks

according to databao statistics, there are 23 stocks (excluding st stocks) that have been held by qfii institutions every year since 2019 and are still heavily held in the first half of this year.

judging from the market performance of these 23 stocks, more than half of the stocks have seen a cumulative increase of more than 100% during the qfii holding period, that is, the share price has doubled, and only four stocks have recorded a negative cumulative return rate.

hengli hydraulics, the leader in the hydraulic industry, has the highest cumulative return on qfii holdings, reaching 613.67%. qfii has held shares for eight consecutive years, and the stock price rose by 238.72% in 2020 alone. hengli hydraulics has obvious characteristics of long-term stable growth. the return on equity (roe) remained between 23% and 31% from 2019 to 2021. the roe declined in 2022 and 2023, reaching 18.55% and 17.36% respectively. the company's net profit compound growth rate in the past five years reached 24.46%.

the qfii holding period of shengyi technology, bank of ningbo, shenzhen airport and bank of nanjing all exceeded 15 years. among them, the qfii holding period of shengyi technology was the longest, reaching 18 years. in the first half of this year, the stock was still heavily held by qfii. since 2007, the stock price of shengyi technology has increased by 545.32%.

according to the statistics of net asset return rate continuously above 10% from 2019 to 2023 and the compound growth rate of net profit greater than 10% in the past five years, a total of 10 steady growth stocks firmly held by qfii were selected, including satellite chemical, jerry shares, ningbo bank, shenzhen south circuit, etc.

qfii's three investment secrets

through the above data analysis, we found that over the past 20 years, qfii's investment in a-shares has been very successful. each track switch was very accurate, and it also held high-growth stocks for a long time. according to databao's observation, the logic of qfii's success lies mainly in the following three aspects.

first, accurate trend judgment and precise timing. since qfii entered the market, the shanghai composite index has reached stage highs in 2007, 2015 and 2021. with its excellent trend judgment ability, qfii has significantly increased its holdings in the year before the high point. statistics show that the market value of qfii holdings increased by 222.74% in 2006, 66.81% in 2014, and 43.68% in 2020.

second, the heavily invested industries are concentrated in relatively safe and stable industries. the banking industry is the foundation of financial market stability. the industry has always ranked first among qfii's heavily invested industries, and its holdings account for a significantly higher proportion than other industries. since 2009, qfii's heavily invested food and beverage, household appliances, pharmaceuticals and biology industries are all typical weak cyclical industries, which are less affected by the macroeconomic cycle. it is worth noting that from 2018 to 2022, the valuation of the consumer industry was high, and qfii began to cash out and leave the market, reducing its allocation to this sector and re-adding banks to the first largest heavily invested industry.

third, qfii has long preferred high roe stocks, and in recent years has preferred growth stocks. databao sorted out the heavy holdings of the three qfii institutions with the highest cumulative yields, namely jpmorgan chase bank, deutsche bank, and ubs, and found that the average roe of nearly 40% of the stocks in the past five years exceeded 10%, and the compound growth rate of net profit of nearly 500 stocks in the past five years exceeded 10%. from the roe level of the overall holdings, the average roe of qfii heavy holdings was around 11% from 2010 to 2015, and increased to around 14% from 2016 to 2020. since preferring growth stocks in 2021, the average roe of its heavy holdings has continued to decline, from 7.74% to 3.63% in 2023.

from a valuation perspective, the p/e ratio of qfii's heavily-weighted stocks was around 54 times from 2010 to 2015, and rose to 58 times from 2016 to 2020; from 2021 to 2023, the average p/e ratio of qfii's heavily-weighted stocks was 81.57 times, 69.67 times, and 73.87 times, respectively. from the perspective of heavily-weighted industries and individual stocks, in recent years, high-valuation growth sectors have also been favored by qfii, and many new energy vehicles, innovative drugs, and communications stocks have received attention from "smart money."