Post-holiday Surge: Over 156 Billion Yuan Spent on Stock ETFs
On October 10th, the A-share market experienced fluctuations throughout the day, with the Shanghai Composite Index regaining the 3,300-point mark. However, the enthusiasm for trading had slightly diminished. Data revealed that the total trading volume in the ETF market reached 376.57 billion yuan that day, representing a decline of over 30% compared to the previous day. Nevertheless, the trading volume of the CSI 300 and various innovative and entrepreneurial-focused ETFs remained robust, indicating sustained interest in those segments.
Recently, there has been a significant influx of funds into equity markets via ETFs. In the two days following the holiday (October 8th and 9th), a remarkable 156.55 billion yuan net flowed into stock ETFs. Analyzing these funds' movement, it's evident that the CSI 300 and innovative, entrepreneurial ETFs were the primary beneficiaries, attracting significant investments from sectors like consumer goods, liquor, and defense. Conversely, substantial selling occurred in semiconductor, chip, and brokerage-related products, with many investors opting to cash in their profits.
Advertisement
As market risk preferences began to improve, industry insiders noted that some funds had shifted from fixed-income to equity markets. However, this trend has recently begun to plateau. Preliminary statistics from the first financial sector indicated that, since September 24th, at least fifteen bond funds observed significant redemptions, prompting adjustments to enhance the precision of their net asset values.
At this point, there exists a divergence of opinions among institutional investors regarding market directions. Some believe that the recent rapid price increases have accumulated considerable profits, creating a demand for corrective adjustments in the market. Others posit that the recent downturn signifies a pause in the broader market rally, forecasting a future characterized by structural differentiation. Continuous attention will need to be paid to policy changes moving forward.
As of October 9th, data from Wind indicated that the total size of all market ETFs reached 3.66 trillion yuan, showing an increase of 911.447 billion yuan from 2.75 trillion yuan on September 23rd. In essence, within just seven trading days, the ETF market expanded by over one-third, and this growth rate is accelerating. This data further solidifies the reputation of ETFs as investment tools that capture investor interest swiftly.
According to data compiled by the first financial sector, on September 24th, the ETF market was valued at 2.87 trillion yuan, and by September 26th, it managed to breach the 3 trillion yuan threshold. Within just two days after that (by September 30th), this figure soared to nearly 3.5 trillion yuan. Although the market experienced turbulence on October 8th and 9th, the ETF market saw daily increases in shares exceeding 52 billion each day.
Currently, about 791 stock ETFs are operating, with a collective fund size hitting 2.91 trillion yuan. During the seven trading days from September 24th to October 9th, a remarkable 287.174 billion yuan flowed into stock ETFs. Specifically, the two days after the holiday produced a net inflow of 156.55 billion yuan, compared to a monthly net inflow of 177.26 billion yuan for September, highlighting the robust demand right after the break.
A review of fund flows post-holiday indicates that broad-based ETFs are still the most favored products among investors. Notably, ETFs tracking the ChiNext Index saw over 40 billion yuan enter within just two days; other ETFs such as those tracking the Sci-Tech 50 and CSI 300 indices also witnessed significant inflows of 24.783 billion yuan and 20.725 billion yuan, respectively.
The growth in fund positions and rising net values led to the emergence of eight ETFs with fund sizes exceeding 100 billion yuan. As of October 9th, the largest ETF—the Huatai-PineBridge CSI 300 ETF—surpassed 400 billion yuan at 402.535 billion yuan, followed by the E-Fund CSI 300 ETF at 260.302 billion yuan. Other prominent ETFs, including the Huaxia CSI 300 ETF, and the Harvest CSI 300 ETF, also exceeded 160 billion yuan.
In sector-specific products, the semiconductor and chip sector attracted substantial capital post-holiday, registering a net influx of 16.857 billion yuan. Additionally, sectors such as consumer goods, liquor, and defense drew significant attention, with respective net inflows of over 1.5 billion yuan into consumer and liquor ETFs.
On the flip side, sectors related to semiconductors, chips, and brokerages saw considerable capital withdrawal. Data from October 8th showed that the securities ETF (512880. SH), chip ETF (512760. SH), and semiconductor ETF (512480. SH) experienced net outflows ranging from 20 million to 90 million yuan on that day. On October 9th, the net outflows for these ETFs reached 3.418 billion yuan, 1.533 billion yuan, and 1.301 billion yuan, respectively. Data from Wind indicated that from September 24th to October 10th, these three products appreciated by 36.4%, 51.01%, and 49.43% respectively.
Generally speaking, the increasing recognition of ETFs as essential financial instruments has led to increased transaction activity as the market rebounds. According to Wind, the average daily trading volume of stock ETFs was 34.677 billion yuan in September before September 24th, skyrocketing to approximately 226.307 billion yuan on September 30th—an increase of over five-fold.
During the trading days of October 8th and 9th, trading volumes for stock ETFs continued to surge, recording 348.528 billion yuan and 312.949 billion yuan, respectively. Although the trading volume on October 10th decreased, it still approached 200 billion yuan at 194.789 billion yuan.
Among the actively traded products, ETFs related to the CSI 300 and other entrepreneurial sectors remain particularly prominent. The E-Fund ChiNext ETF, Huatai-PineBridge CSI 300 ETF, and Huaxia Sci-Tech Board 50 ETF all saw average daily trading volumes exceeding 23 billion yuan. Additionally, the E-Fund Sci-Tech Board 50 ETF and Harvest Sci-Tech Board chip ETF surpassed 10 billion yuan in daily trading volume.
In this lively market scenario, numerous fund companies have been focusing on attracting investor interest. On one hand, some firms have been actively marketing through videos, posters, incentives for answering questions, and educational platforms to enhance their visibility. On the other hand, others have chosen to lower their fee rates to attract more participants.
For instance, Huaxia Fund announced that starting October 9th, the management fee for its ChiNext ETF and its connected fund would be reduced from 0.5% to 0.15%, while the custody fee would be adjusted from 0.1% to 0.05%. Similarly, Penghua’s CSI 300 connected fund enacted fee reductions.
Not only are ETFs and their connected funds seeing increased marketing efforts, but other products are also joining the fray amid the rising enthusiasm for trading A-shares. According to preliminary statistics from the first financial sector, over twenty fund companies, including Wanji Fund, Ping An Asset Management, Harvest Fund, and Nuoa Fund, collaborated with distribution channels to promote fee discounts for their funds, such as offering subscription fee discounts up to 90%.
Industry insiders believe that a reduction in fees directly lowers investment costs for holders, significantly enhancing participants' sense of gain. "Low-fee ETFs can capture the attention of those sensitive to costs, which may stimulate sales to a certain extent," remarked a marketing executive from a large fund company. Since ETFs inherently have attributes that lead to high similarity, fee reductions can help gain a competitive edge.
It is noteworthy that as pessimistic expectations have reversed and the market's risk appetite has been boosted, some funds have seen large redemptions as they shift from fixed income to equities. This has prompted fund companies to respond by enhancing the accuracy of share values.
On October 10th, GF Fund announced that its Guangfa Jinghua Pure Bond Class C experienced substantial redemptions on the 9th. To protect the interests of fund holders from adverse impacts due to decimal precision in share values, the fund adjusted its value precision to eight decimal places starting from that day, rounding to the ninth decimal place.
Similar circumstances arose with products such as Huatai-PineBridge and E-Fund's pure bond funds. At least fifteen bond funds witnessed substantial redemptions since September 24th and adopted precision enhancement methods to mitigate considerable fluctuations in their net values.
Regarding these developments, several fund industry representatives indicated that there had been some noticeable patterns in their databases. "Before the holiday, certain bond funds were indeed experiencing significant redemptions, but after two days of evident market fluctuations, the scale of redemptions significantly eased," stated a representative from a medium-sized fund company. Presently, conditions in the bond market have somewhat stabilized, and marketing approaches are transitioning to a dual focus on stocks and bonds.
In the three trading days following the holiday, the A-share market exhibited instability. According to industry insiders, this round of A-share price increases, coupled with inflows from foreign and domestic capital and new retail investors entering, contributed to a quick surge in trading volumes and market momentum. Currently, the market appears to still be in a rapid upward phase, with elevated sentiments and ongoing valuation repair taking place.
“On October 10th, the two previously robust sectors, brokerages and semiconductors, appeared to be in a phase of divergence, indicating a return to a high-low rotation mode as an influx of new funds gradually diminishes,” observed a fund research expert from Shanghai. Overall, the downturn on October 9th might signify a temporary halt in the broader market rally, while future trends could manifest through structural differentiation, prompting the need to grasp the rhythm of rotating hotspots as essential for investors.
Chief economist Yang Gang from Golden Eagle Fund concurs with these insights. He articulated, "Despite notable fluctuations and profit-taking pressures following the National Day holiday, extending the time frame shows that China’s economy is poised to overcome short-term challenges, continuing its post-pandemic recovery trajectory, which is likely to unleash vast domestic market potential and propel high-quality growth during the ongoing transformation process."
Bosera Fund views the current situation in a somewhat restrained manner, emphasizing that while the A-share market has exhibited strong performance recently, the rapid price increases have accumulated substantial profit-taking pressure, suggesting an inherent need for market correction. As a result, the market witnessed considerable volatility on October 10th. They advise investors to manage their positions wisely amidst short-term price fluctuations, advising against excessive panic in response to temporary market movements while remaining vigilant regarding forthcoming policy changes.
On October 10th, the People's Bank of China unveiled a new initiative to establish a "swap convenience for securities, fund, and insurance companies." This program supports qualified institutions in using assets like bonds, stock ETFs, or CSI 300 constituents as collateral to exchange for high-quality liquid assets like government bonds or central bank notes. The initial operation scale is set at 500 billion yuan, with the potential for further expansion based on situational demands.
During a press conference held by the State Council Information Office in late September, the governor of the Central Bank, Pan Gongsheng, announced the establishment of this new swap convenience tool to support capital markets. The October 10th announcement signifies the formal launch of this policy, which is viewed as a significant bolstering mechanism for market stability, enhancing liquidity in the equity market and boosting investor confidence.
According to China Europe Fund, drawing on international experiences, the primary forms of such swap conveniences involve non-bank institutions trading assets with the central bank, such as exchanging stocks for bonds, allowing further market-based financing via collateral financing to enhance leverage. This tool effectively boosts liquidity for non-bank entities, positively impacting market sentiment, and allowing institutional investors to utilize this mechanism for a quicker recovery toward more rational market valuations during periods of improving economic expectations.