Net inflow of northbound funds in 2019 hit a record high of 352.889 billion yuan

2019/12/31 15:12:13 Source: Yimeng2019 / 12/31 15:12:13

In 2019, the cumulative net inflow of Shanghai Stock Connect was 157.227 billion yuan, the net inflow of Shenzhen Stock Connect was 195.662 billion yuan, and the net inflow of northbound funds was 352.889 billion yuan, exceeding the net inflow level of 2018.

In 2019, the cumulative net inflow of Shanghai Stock Connect was 157.227 billion yuan, the net inflow of Shenzhen Stock Connect was 195.662 billion yuan, and the net inflow of northbound funds was 352.889 billion yuan, exceeding the net inflow level of 2018.

[Further reading]

The strongest main force in 2019: foreign investment bursts with 540 billion annual sweeping inventory exposure

Foreign capital has always been regarded as the "smart money" of the A-share market. In 2019, foreign capital opened a burst buying model. The market estimates that the inclusion of the three major international indexes in A-shares has brought an increase of 540 billion, of which the net inflow of funds from the Shanghai-Shenzhen-Hong Kong Stock Connect to the north has reached nearly 3,500 Billion, a record high. More importantly, the move of foreign capital has become a market vane, and they are and will continue to profoundly change the ecology of A shares.

The total market value of foreign shares is 1.77 trillion

The first three quarters of data previously released by the central bank show that domestic RMB stocks, bonds, loans, and deposits held by overseas institutions and individuals have all increased month-on-month, totaling four items totaling 5.86 trillion yuan. It is worth noting that the total market value of stocks held by foreign investors was 1.77 trillion yuan, a 38% increase from last year's 1.28 trillion yuan.

Since December 2013, the People's Bank of China began to disclose the stock market value of foreign funds. According to IFC Securities It is estimated that as of the third quarter of this year, based on the market capitalization of foreign currency, foreign-invested stock assets amounted to 1.76 trillion yuan, of which QFII & RQFII held 0.60 trillion shares and Lufentong held 1.16 trillion shares.


(Image Source: IFC Securities )

The data shows that among the major investors, the first three quarters of 2019, the total market value of foreign holdings increased fastest, higher than public offerings and insurance funds; the total market value of public offerings and insurance holdings maintained a positive growth; the total market value of trust holdings Still falling.

IFC Securities According to the data, as of the third quarter of this year, the total market value of foreign capital, public offerings, insurance, and trust holdings increased by 38.33%, 31.71%, 8.60%, and -25.27% year-on-year.


(Image Source: IFC Securities )

Institutions: Three major international indexes bring in 540 billion increments

The influx of foreign capital is closely related to the inclusion of the three major indexes in A shares (or expansion). According to estimates by Guosheng Securities, the three expansions of A shares by MSCI this year have brought more than 460 billion yuan of incremental funds to A shares. Including the increase in funds brought by the inclusion of A-shares in Fuji Russell and the Dow Jones Index, the capital increase in A-shares brought by the three major international indexes since this year is about 540 billion yuan.


(Image source: Guosheng Securities)

Northbound funds net buy 350 billion

Among the foreign capital allocated this year, Shanghai-Shenzhen-Hong Kong Stock Connect is undoubtedly one of the important main channels. The data shows that as of December 27, the net inflow of funds from the Shanghai-Shenzhen-Hong Kong Stock Connect to the north in 2019 has reached a record high of 347.4 billion yuan.

3 stocks almost "buy" by foreign capital

How strong is the ability of foreign capital to "sweep goods" in A shares? In 2019 Han's Laser , Midea Group , China Test Three stocks were almost bought by foreign investors.

According to the regulations of the Shanghai and Shenzhen Stock Exchanges, the critical points of foreign shareholding are 26% (alert point), 28% (purchase point) and 30% (mandatory reduction point).

According to the relevant requirements of the China Securities Regulatory Commission, once the Shanghai Stock Exchange / Shenzhen Stock Exchange has notified the Stock Exchange of the individual Shanghai Stock Connect / Shenzhen Stock Connect's total overseas shareholding ratio of 28%, any further purchase of the Shanghai Stock Connect / Shenzhen Stock Connect will Not accepted until the overseas shareholding ratio of the Shanghai Stock Connect / Shenzhen Stock Connect has fallen below 26%.

According to the latest data from the Shenzhen Stock Exchange, as of December 25, QFII / RQFII / Shenzhen Stock Connect investors held Midea Group The number of shares in the total share capital has reached 27.64%, which is only one step away from the 28% ban on buying; China Test The proportion has also reached 26.09%.


(Photo source: Shenzhen Stock Exchange's official website)

In fact, back in March of this year, Han's Laser Because of the high proportion of foreign-owned shares, it was "purchased." The Hong Kong Stock Exchange issued a statement on March 5 stating that due to Han's Laser Overseas investors have a total shareholding ratio of more than 28%. From March 5, 2019, Shenzhen-Hong Kong Stock Connect has temporarily stopped accepting buying orders for the stock.

It is generally believed in the industry that with the accelerated influx of foreign capital into the A-share market, more stocks that meet the aesthetic preferences of foreign capital will appear in the future, exceeding the 26% "warning line" and even reaching the ceiling of foreign capital holdings of 30%.

Dazhi Wang, general manager of Shanghai Investment Morgan Fund, said that foreign capital likes certainty and is willing to pay a premium for it. They buy in various countries / regions in industries that have global comparative advantages and have core competitiveness in the industry. Leading company. The top 100 stocks held by foreign investors in the last five years have an excess return of 384%.

How much foreign investment or inflow will be made in 2020?

After the northbound funds continue to increase positions, the market has some concerns about the continuity of northbound funds inflows, but institutional sources believe that in 2020 foreign investment will likely continue to maintain unilateral inflows.

Guosheng Securities said that from a rhythm perspective, after MSCI completed the "three steps" expansion during the year, there should be at least a half-year window to determine the next expansion process of A shares. From international experience, during the MSCI expansion interval, foreign investment will still continue to flow unilaterally.

China Merchants Securities Chief Strategy Analyst Zhang Xia said, "In 2020, the expansion of MSCI and other international indexes for A-shares will slow down, and the resulting passive incremental funds will be weakened accordingly. However, considering that foreign funds are currently held in A-shares, The proportion of stocks is not high, and it is still in the step of adding positions. With reference to the process of South Korea and Taiwan in incorporating MSCI, it is expected that overseas funds will generally remain in a net inflow state in 2020, and the total is expected to reach 250-300 billion yuan.

Huatai Securities In the latest research report, it is expected that the scale of annual overseas incremental funds is expected to reach.

In the long run, foreign investment is just the beginning. Qian Delong, chief economist of Qianhai Open Source, believes that the previous global capital allocation to the A-share market was too low, accounting for only 2.5%, which is far lower than China's GDP, which accounts for 16% of global GDP. The gap is very large. To some extent, this also means that foreign capital will continue to flow into the A-share market in the next 10 years.

Which stocks do Beixiang Capital and QFII like most?

At the individual stock level, since 2019, which stocks does Northbound Capital and QFII prefer?

  The data shows that as of December 27, 2019, the ranking is based on the changes in the number of shares held and the proportion of outstanding shares. China Test , Qilian Mountain , Opal Home , Dashenlin , Sofia , Yixintang , Industrial Fulian , Sunlight lighting Waiting for 17 stocks to obtain a northbound capital increase of over 7%, of which China Test More than 13%.

China Torch High-tech , Dean diagnosis , Gree Electric , Kangyuan Pharmaceutical , Tiger Pharmaceuticals , Zhongshun Jierou , Day Star Wait for 19 stocks to increase their holdings below 7%, but above 5%.

From the perspective of the industry, technology and medicine are undoubtedly the two main lines of northbound capital focus increase. Like in the medical field Dashenlin , Yixintang , Tiger Pharmaceuticals Etc .; also in the field of technology stocks China Test , Industrial Fulian , Guangxin ring network and other stocks.

Which shares have QFII increased?   Data show that as of the third quarter of 2019, the stocks with the highest QFII holdings are also concentrated in the pharmaceutical, consumer and technology sectors, but there are also non-bank financial sectors. Jiangsu Leasing , And steel Wujin Stainless .

Foreign investment: optimistic that next year A shares will expand stock selection along 4 main lines

Morgan Stanley also predicted in the 2020 outlook report released at the end of the year that the large-cap stock index will rise in 2020. Take the Mingsheng China Index and the Shanghai and Shenzhen 300 Index, which represent the offshore Chinese stock market, respectively. The target prices for the two are expected to be 85 and 4180 points in 2020. % Upside.

UBS's "overweight" position on Chinese stocks has not changed. Tan Minlan, chief investment officer of UBS Asia Pacific, said that the overall performance of Chinese companies in the third quarter was better than expected. The interesting thing about the Chinese market is that although the growth rate is slowing down, it can be seen that the economic structural adjustment that all sectors are striving for is "bearing fruit". The economic restructuring of the past few years has made consumption a greater contribution to China's economic growth.

UBS said in its 2020 outlook report that it is bullish on the stocks of Chinese Internet companies and 5G smartphone supply chain companies.

However, it is worth noting that as the popular A-share track starts to crowd, foreign investors are more inclined to expand the stock selection range in the future. Lin Huatang, manager of China Equity Portfolio of U.S. asset management giant Lianbo Group, said that global investors investing in A shares through the stock interconnection mechanism is more convenient than previous QFII and RQFII channels. At present, the layout of foreign investment in A shares is mainly concentrated in Consumption, health and technology are three major sectors. This trend contains both opportunities and risks.

Lin Huatang believes that "due to excessive concentration, the inflow and outflow of foreign capital will cause large fluctuations in the relevant sectors. The opportunity is that there are currently more than 3,400 listed companies in A shares. From a liquidity perspective, there are about 1,000 stocks It can be included in the scope of foreign investment. At present, foreign investment may only be concentrated on the largest 40 stocks. If you do your homework, you can find good investment targets from more than 900 other stocks. "

CITIC Construction Investment A newly released research report indicates that if the proportion of foreign holdings in the total market capitalization in the last month is sorted and the list of the top 30 stocks to be increased, it can be found that foreign investors are clearly buying A along 4 main lines. Stocks, that is, real estate completion chain, underestimated cycle chain, technology stocks represented by computers and media, and callback white horse stocks.

Some QFII fund managers have stated that the valuations of many good companies are now more expensive, and we will look for other better opportunities when performing portfolio allocation. Some companies have good textures, but their performance is inhibited due to the industry environment. Once the market environment changes, the performance of such companies will be reflected, and Alpha benefits can be obtained from it.

Lu Wenjie, a Chinese investment strategist at BlackRock, the world's largest asset management company, believes that the market is generally pessimistic about the manufacturing cycle, while manufacturing inventory has bottomed, and weak investment is mainly due to the lack of confidence in the market. At present, it has been observed that the forward-looking mood of the manufacturing industry has improved. Combined with the implementation of the tax reduction policy, the cyclic industry will have a large rebound space next year.

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