Severely Shrunken New Issues, Yet Robust Inflows into Broad ETFs

On one side, new fund launches are met with a cold reception, while on the other, a significant influx of capital is pouring into broad-based ETFs. This was the scene in July for the sales of public mutual funds. The situation is reminiscent of February; will the market be迎来 a rebound moment?

A significant reduction in issuance scale

80 funds, 52.784 billion yuan.

These are the number and scale of funds established in July. The previous month's figures were 119 funds and 175.17 billion yuan. In comparison, the new issuance scale is less than one-third of that in June.

Looking at the year, this performance is only higher than February's "60 funds, 36.097 billion yuan." The uniqueness of that month was the week-long Spring Festival holiday, which reduced the issuance schedule by a quarter.

The coldness of new issuances in July comes from two aspects.

On one hand, the stock market still shows no signs of improvement. Looking at the performance of the three major stock indices, the Shanghai Composite Index fell by 0.97%, the Shenzhen Component Index fell by 1.07%, and the ChiNext Index rose by 0.28%.

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The lack of profit-making effect makes it difficult to stimulate investors' enthusiasm for subscription. The number of equity funds established in the month was 29, with a total fundraising amount of only 5.183 billion yuan; the number of mixed funds was 17, with a total fundraising amount of only 2.68 billion yuan.

On the other hand, the bond market is cooling down. Although bond funds still led the issuance in July, with 24 products raising 38.695 billion yuan, compared to the previous four months, the issuance scale has significantly shrunk.According to statistics, from March to June, the number of newly established debt funds were 46, 40, 29, and 44 respectively, with corresponding scales of 113.215 billion yuan, 117.916 billion yuan, 84.677 billion yuan, and 152.508 billion yuan.

The latest research report from Everbright Securities points out that since late November 2023, the yield on government bonds has been generally declining and is currently at a historical low. Since April of this year, the central bank has provided multiple expectations for the trend of long-term and ultra-long-term bonds. "Looking ahead, we believe that caution should be exercised in the short term in response to changes in the bond market, and attention should be paid to the operations of the central bank."

Broad-based ETFs continue to be increased

Unlike the cold reception of new issuances, broad-based ETFs continue to be increased by large funds.

According to statistics, in July, the ETF share increased by 88.635 billion shares, and the scale increased by 233.434 billion yuan. Among them, the index with the largest increase in shares was the CSI 300, with a net inflow of 47.562 billion shares, and the scale increased by 132.615 billion yuan. In addition, the CSI 1000 index had a net inflow of 12.989 billion shares, and the scale increased by 26.683 billion yuan.

From the aforementioned issuance data, it can be seen that the main increase does not come from new issuances. Looking at the subscription signs in the first half of the year, the main contributors to the broad-based ETFs in July may still be institutional investors such as Central Huijin.

The first and second quarter reports of the fund show that Central Huijin has made a large "sweep" of the top broad-based ETFs in the first half of the year.

In the first quarter, Central Huijin increased its holdings of Yifangda CSI 300 ETF by 45.706 billion shares, Huatai Bo Rui CSI 300 ETF by 26.356 billion shares, Huaxia CSI 300 ETF by 16.993 billion shares, Huaxia SSE 50 ETF by 15.867 billion shares, and Harvest CSI 300 ETF by 15.604 billion shares. According to the estimated average transaction price, a total investment of over 300 billion yuan was made.

In the second quarter, it continued to increase its holdings, adding 3.051 billion shares of Huatai Bo Rui CSI 300 ETF, 1.258 billion shares of Harvest CSI 300 ETF, 1.051 billion shares of Huaxia CSI 300 ETF, 564 million shares of Huaxia SSE 50 ETF, and 833 million shares of Nanfang CSI 500 ETF. According to the estimated average transaction price, the total amount exceeded 25 billion yuan.

Looking at the past rhythm of increasing positions, Central Huijin usually enters the market at a relatively low point. For example, on February 5th, the Shanghai Composite Index once fell below 2,700 points, setting a low point for the year. The next day, Central Huijin announced, "It has recently expanded the range of exchange-traded funds (ETFs) and will continue to increase the intensity and scale of increases."Morgan Stanley Fund notes that the current market can be compared to the situation at the beginning of February, when the market also continued to decline for over two months and eventually faced liquidity risks. Under the combination of timely regulatory intervention, verbal guidance, and the release of new policies, the market rebounded strongly.

"We believe that the current market has a significant room for repair from a valuation perspective, and industries with better sustainability in the future are expected to be in the previously oversold sectors, such as pharmaceuticals, home appliances, computers, and high-end manufacturing," Morgan Stanley Fund judges. In the medium term, it is still difficult to see a reversal, which requires tracking the effectiveness of subsequent policies. If economic stability and flatness can be observed, sectors such as technology growth, pharmaceuticals, and high-end manufacturing may be worth paying close attention to.

China AMC states that with the improvement of market risk appetite, the market may usher in a rebalance of styles, and the valuation of growth stocks is expected to rise further in the future. Companies listed on the STAR Market are mainly concentrated in the new generation of information technology industries, such as artificial intelligence, semiconductors, and high-end equipment. Currently, they are facing a triple resonance of strong policy support, the recovery of the technology industry's own prosperity, and the expectation of a loose monetary environment both domestically and internationally. It is recommended to pay long-term attention to the investment opportunities in the STAR Market.