"One cannot step into the same river twice", and so does the A share.
As of September 15th, the trading volume of A shares exceeded one trillion yuan for the 41st consecutive trading day, but the "super bull market" when similar situations occurred last time has not come.
This has led to this year's heavy quantitative trading being pushed to the forefront, and foreign investment has also been involved in this controversy.
A piece of information has caused an uproar in the market-the main foreign force in the A-share market is not overseas funds, but mainland quantitative fund giants that have obtained a license in Hong Kong. They allocate capital in Hong Kong 5 times and operate frequently in the A-share market, and their scale is expanding very much. quick.
Does quantification have a negative impact on the A-share market?
What role does real and fake foreign investment play?
What does the so-called quantitative "unfairness" in the market mean?
How to improve the market ecology in the future?
In response, a reporter from China Business News interviewed business professionals and investment managers from a number of Chinese and foreign institutions.
According to their feedback, due to the high financing costs in the domestic market and the difficulty of securities lending, many domestic private equity firms set up institutions in Hong Kong or use Hong Kong brokers to raise funds. The cost is only about 1/4 of that of the mainland and the leverage is higher. All walks of life are worried about high leverage or aggravating market volatility, and quantification has also led to the acceleration of market rotation and aggravated the phenomenon of "grouping" small and medium-sized companies with market capitalization.
At the same time, from the perspective of fairness, some quantitative institutions enjoy faster transaction speeds and have the advantage of T+0 transactions.
However, the proportion of quantitative transactions in A-share transactions (including foreign investment) is about 20%, far lower than the rumored 50%, and from the perspective of institutional investors, regardless of increasing market liquidity and improving pricing efficiency On the one hand, quantification still plays a more active role.
Quantitative trading is in the ascendant in China, but there is undoubtedly a need to strengthen communication between "mysterious quantification" and the regulatory authorities.
Quantitative products have generally performed well this year, and the scale of issuance has risen sharply.
However, the recent quantification has been pushed to the forefront of public opinion because on September 6, the chairman of the China Securities Regulatory Commission, Yi Huiman, when attending the 60th World Federation of Exchanges (WFE) General Assembly and Annual Meeting in 2021, talked about quantitative trading, etc. Regulatory issues for new trading methods.
He mentioned that while quantitative trading and high-frequency trading can enhance market liquidity and improve pricing efficiency, they can also easily lead to problems such as transaction convergence, increased volatility, and violation of market fairness.
He also believes that the exchange can do some thinking in response to the capital structure of the market and new trading tools.
A person from a leading domestic quantitative private equity agency told a reporter from China Business News: “The market turnover has exceeded one trillion in dozens of days. Discussion of market impact; on the other hand, the concern of all walks of life may be that once the market reverses, quantification may also lead to a large retreat in the market."
As early as September, a message stating that “quantitative trading contributed half of the trading volume of A-shares” swept the screen, which caused many investors to panic. Some even pointed out that quantification was an “AI harvester” and subjective investment would be harvested.
At the same time, the market was once worried about whether "heavy volume and stagnation" would be a sign of an imminent decline.
For example, on September 1, the daily trading volume reached 1.7 trillion yuan, reaching the level of 2015, but the index did not rise significantly. Although the Shanghai Composite Index rose 1.69% that week, the ChiNext Index fell 4.76%.
Historically, this high-volume stagflation is seen by many technicalists as a high-level change of hands and a sign of an imminent decline.
But in fact, the recent high volume is due to quantitative change of hands, which is different from the past.
Chunpu Investment Chairman Wang Shuyi told the CBN reporter that quantification is not the main contradiction and core issue of the market, nor is it the main factor affecting the market. The main function of quantification is judgment, probability and tracking, and even the rise of individual stocks is not quantification. If it is decided, quantification plays a role in boosting the rise.
"This year's market is actually not dominated by quantification. Quantification is the'effect' rather than the'cause'. It is actually promoted by macro trading, foreign investment and public offerings." Senior macro trader Yuan Yuwei told Yicai.com, "The "Mao Index" Falsifications and setbacks lead to capital flow to small and medium-sized enterprises, and then quantitatively expand the scale. The above trend is strengthened. Macro policies that support small and medium-sized enterprises, encourage technological innovation, and ensure internal circulation will also cause liquidity to flow to growth and small market value factors. Quantitative benefits The exposure of the small market value is not that they actively drive the style rotation, but are passive. In fact, artificial intelligence and machine learning are not optimized this year. It is estimated that the quantitative fund will perform well with the old strategy of 2015."
However, Wang Shuyi also said that quantification contributed to most of the market's trading volume and distorted the market.
However, most market participants said that due to the active boom stocks and the long track, the market has not yet seen the possibility of a significant cooling.
What is the impact of true and false foreign investment?
In addition to quantifying the transaction form itself, the debate about "true and false foreign investment" has rekindled.
According to the reporter's understanding, the head of quantitative private equity was recently under the guidance of the window, and then "fake foreign investment" has attracted attention.
Recent data also shows that compared with July this year, foreign investors increased their holdings of Shanghai and Shenzhen stocks more than doubled through the Shanghai/Shenzhen-Hong Kong Stock Connect and other mechanisms in August.
The business director of QFII (Qualified Foreign Institutional Investor) of a large foreign institution told a reporter from China Business News that “the definition and statistics of quantitative funds are relatively difficult. The proportion of QFII funds is about 4%~6%. In addition, the amount of some QFII funds is relatively small, and the overall proportion of foreign investment may be 5%~7%. In addition, quantitative funds in the Mainland are added together. , May account for 10% to 20% of the transaction volume, not as high as the rumored 50%."
However, foreign investment has attracted special attention.
In his view, this is more because overseas quantitative funds have some mystery, "not relying on fundamentals to select stocks, but through various models and quantitative analysis to carry out investment layout, so everyone feels that there is some mystery. color."
In addition, "fake foreign investment" does exist.
In fact, China Business News reported on the situation of "fake foreign investment" speculating in A shares in the past two years.
At present, the problem that the market is more worried about is actually the high leverage of "fake foreign capital."
"The domestic financing cost is nearly 8%, and the offshore market is generally 1% to 2%. Compared with the double leverage limit generally used in China, the offshore leverage is much higher, and the cost and convenience of securities lending are also higher." Private equity sources told reporters that this is also the reason why so many mainland private equity firms go overseas.
Public information shows that Ningbo Magic Square Quantitative, a quantitative giant with a management scale of more than 100 billion yuan, has established a Hong Kong branch Magic Square Capital Management (Hong Kong) Co., Ltd., and obtained the approval of the regulatory authority for qualified foreign investors in December 2020. .
In addition to setting up branches in Hong Kong, mainland private equity can also use "revenue swaps" with brokers to deploy overseas markets in disguise.
Specifically, the so-called "revenue swap" is mainly provided by the brokerage firm, that is, the private equity and the brokerage firm sign an over-the-counter agreement for the exchange of cross-border income rights, and pay a fixed cost to the brokerage firm every year to open an account with the brokerage firm’s overseas subsidiary. Realize overseas stock allocation.
In addition to the above-mentioned "south" business, "revenue swap" also has a "north" business. The northbound business is mainly for private equity. Deposit deposits at Hong Kong brokers. According to their qualifications, brokers can provide different leverage for them, so that private equity institutions can do so. Obtain lower financing interest rates and higher securities lending convenience than the mainland market.
Earlier, the 100 billion private equity was misunderstood as insider trading because of the "income swap" operation.
As of the end of the first quarter of 2020, Mingluo’s value growth phase 1 appeared among the top ten shareholders of tradable shares of 30 stocks, of which 29 stocks held positions were “synchronized” with a certain brokerage firm, and the position convergence was close to 97%. Several stocks such as Electric Power, Shenchi Electromechanical, Rongda Sensitivity, etc. all soared continuously at that time.
In response to market doubts, Mingluo investment staff stated that the company’s transactions made by the brokerage and its Hong Kong subsidiary in the form of income swaps, the stock income held by the brokerage due to the earnings swaps would be swapped for Mingluo products. This business model complies with regulatory rules.
Pay attention to quantitative fairness and system construction
Industry insiders continue to call for attention to quantitative fairness issues and system construction, and suggest that institutions and regulators strengthen communication.
The person in charge of the QFII business of the above-mentioned foreign-funded institution also mentioned to a reporter from China Business News that the convergence of quantitative trading strategies, flash crashes, or chasing ups and downs, which have been discussed in various circles, are all related to recent supervisory attention.
"However, quantitative trading has mature markets and supervision overseas, and there are also many differences in intellectual property rights and strategies. Therefore, in terms of transaction convergence and increased volatility, there is no data to support such a concern. As for whether there is any Where market fairness is violated, it depends on the supervision of relevant transactions in different markets."
"In the domestic market, there may be some quantitative institutions that can get some data on transactions and market orders faster." He said.
Wang Shuyi also said, "Quantification itself is not a problem, but there is a fairness problem. For example, hosting servers may cause a gap in the transaction speed of all traders. We should not only focus on efficiency and ignore fairness; at the same time, we should strengthen the construction of quantification systems and plan ahead."
Yuan Yuwei previously told Yicai.com reporters that compared with overseas markets, China’s quantitative unfairness lies more in the lack of a T+0 trading system and short-selling mechanism in the country, and the difficulty and high cost of securities lending. “The current quantitative advantages are mainly in T+0 and shorting the runway is not a strategy. One example is that the performance of overseas quantitative institutions in A-share products is obviously much better than overseas products." He said.
Many people from Chinese and foreign institutions also pointed out that from the perspective of global trends, quantitative trading is in the ascendant in China. Quantitative trading has a relatively positive effect in terms of increasing market liquidity and improving pricing efficiency.
Regarding the problems that arise in the development process, the supervision of programmatic transactions also needs to keep pace with the times.
At the same time, the industry should also research and resolve doubts based on data and facts, so that it can maintain more adequate communication with the market, investors, and supervision, and it can also help the supervision formulate corresponding regulations and systems.
Author: Zhou Ailin