a large amount of foreign capital is trying to pour into the stock market before the 8th and is paying close attention to the golden week data.
2024-10-06
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regarding the large influx of funds into chinese stocks, bank of america securities has made the latest statement.
during the national day holiday, overseas investors snapped up chinese assets. bank of america securities released a report on october 4 in response to eight major questions from clients about chinese assets. it stated that a large amount of funds have poured into chinese stocks recently, trying to get in before the opening of a-shares. it is not yet clear whether the funds have filled the underweight gap. . there is a frantic rush to raise funds, and some overseas chinese etfs have received over 10 billion net purchases since september 24. bank of america securities recommends going long on the csi 500 index and csi 1000 index through swaps, or directly trading etfs linked to the csi 300 overseas.
the "low configuration pit" is gradually being filled
in a report from bank of america securities, one of the questions asked by clients was: with the recent surge of capital inflows, are chinese stocks still underweighted? in response to this question, bofa securities responded: for public funds (mutual funds), the position data for september has not yet been disclosed. we have to wait until the position data of public funds in september and october are disclosed to know whether the gap of underweighting china has been filled. however, from the capital data on bank of america’s own platform, it can be seen that the chinese positions of global funds appear to be “full”. in the past two weeks, data from the bank of america platform showed that bull funds bought a net us$3.4 billion in chinese stocks. the scale of this net buying is similar to that of the post-epidemic period. the difference is that this time the funds are being raised faster. bofa securities said global funds are trying to get in first before next tuesday. they bought hong kong stocks, u.s.-listed depositary receipts and etfs linked to overseas a-share indexes this week. it can be seen that even if the market pulls back when a-shares open next tuesday, it will only be a very shallow pullback.
source: bofa securities report.
between a shares and h shares, bofa securities believes that a shares are currently more cost-effective. the foreign bank even believes that it is not impossible for a-shares to have a bull market like the one from 2014 to 2015. because residents have accumulated a large amount of savings in the past few years, the amount of funds that can enter the stock market is very large. "before the bull market started in 2014, residents' savings increased by 15 trillion yuan. before this round of market rebound, residents' savings had increased by 40 trillion yuan. in other words, there are more funds waiting to enter the market," bank of america securities said.
it is worth noting that most asian markets, except india, have completed their correction before the rebound in chinese stocks. the japanese market has seen $31 billion in outflows since may, while taiwan has experienced $18 billion in outflows since the may high. bofa securities has judged from this that if the chinese market continues to rise, india may become a place for funds to be transferred out.
kweb has received over 10 billion yuan in net purchases
as of october 3, two of the top five etfs that have attracted the largest inflows of funds among u.s.-listed etfs in the past week are chinese etfs, namely kweb, which tracks the internet index, and fxi, which tracks the ftse china 50 index. data from the etf tracking website (etf.com) shows that in the week ending october 3, kweb received net purchases of more than us$1.4 billion, and fxi received net purchases of us$1.251 billion. china’s etf ranks among the top five net fund inflows, something that has rarely happened in the past three years.
source: etf.com
the net value of the etf has soared, coupled with the inflow of funds, kweb, the internet celebrity etf, has expanded to us$7.35 billion. since september 23, kweb has received net purchases of us$1.811 billion, equivalent to 12.7 billion yuan. in an interview with the media on october 3, branden ahern, cio of kweb's publisher, american kingsoft fund, said that there is still room for growth in chinese stocks.
slow closing of short positions
the chinese market has surged, but overseas short positions have been slow to unwind.
data from s3 partners, a short position tracking data website, shows that as of october 1, short sellers of overseas chinese concept stocks have recorded losses of nearly us$7 billion. a report from s3 partners stated, “since september 23, china has been actively injecting stimulus measures into the economy to reverse the situation in the real estate industry, provide support to the market, and boost economic confidence. therefore, since september 13, during the year since the lows, the csi 300 index has recorded stunning gains. surprisingly, despite the general rebound in us-listed mainland china/hong kong stocks, short sellers have not yet closed their positions on a large scale, and they are suffering paper losses."
on october 1, alibaba’s short positions amounted to nearly us$7 billion; pinduoduo’s short positions amounted to us$4.1 billion. two internet stocks are chinese concept stocks with the largest short positions.
short sellers usually borrow bonds to sell first, and then buy them at a low price to make a profit after the stock price falls. today, stock prices are soaring in the chinese market, and short sellers are recording significant paper losses. in this case, why don't short sellers close their positions and stop losses in time? the equity investment director of a private equity firm in hong kong explained that there may be two reasons behind this. first, it is due to the inertia of thinking formed by investors in the past three years. every time chinese stocks rose in the past three years, it provided short-selling opportunities for overseas investors. this time, some investors are following the same thinking. second, some hedge funds aim to generate alpha that is not affected by market fluctuations. no matter what the market is like, their net position remains above 20%. this group of hedge funds will not chase the market after it rises.
a report from s3 partners pointed out that if the chinese market continues to rise, it is expected that there will be large-scale short closing of chinese concept stocks, which will further push up the stock price. alibaba's stock price is likely to be affected the most. after this round of gains, alibaba’s short positions increased. when shorts begin to unwind their positions en masse, the combination of closing buys and long buys may intensify the upward slope of their stock prices.
keep an eye on the “golden week” data
since september 24, the stimulus plan announced by regulatory authorities has stimulated a surge of global funds to buy chinese assets. blackrock upgraded chinese stocks to moderately overweight. however, some investors are still cautious. for example, rajiv jain, fund manager of the gqg partners emerging markets equity fund, said the rally may be a short-term move.
many overseas institutions believe that the subsequent trend of chinese assets depends on subsequent stimulus measures. investors are waiting for data from the national day "golden week" to determine whether consumption has rebounded.
britney lam, head of long-short strategy at magellan investment holdings co., ltd., said, “in the coming weeks, relevant chinese authorities may announce more consumption-oriented stimulus measures, such as measures related to social welfare and social security. global asset allocation is shifting back to china. the stock market may become an important driver of chinese assets." raymond ma, chief investment officer of invesco investments in mainland china and hong kong, china, believes that some stocks have risen too much since september 24.
source: reprinted from "china fund news"
