From the beginning of 2023 to mid-February, the urgency of northbound funds to buy A shares has caught the market beyond expectations.
From the perspective of capital movement, the data shows that in the first 20 days of this month, the net inflow of northbound funds into A shares exceeded 22.6 billion yuan. In the past January, the net inflow of northbound funds reached 141.2 billion yuan, reaching the historical net inflow in a single month. highest value.
At present, the amount of foreign capital flowing into A shares this year has exceeded 160 billion yuan.
In a long-term perspective, since November 7, 2022, northbound funds have flowed into A shares for 14 consecutive weeks. Among them, January 16 to January 20, 2023 is the week with the largest net inflow of A shares, with an amount reaching 485.16 billion.
Although in recent trading days, the inflow of northbound funds has slowed down due to factors such as market short-term shock adjustments, but from the overall situation, northbound funds have become an important increase in the A-share market in the near future.
Northbound funds refer to the inflow of funds from the Hong Kong capital market into the A-share market, most of which are composed of international capital.
Northbound funds are usually regarded as the vane of international capital allocation for A-shares, and they are good at mining value growth stocks.
In fact, the continuous inflow of northbound funds shows that funds are more optimistic about the future economic and capital market development.
Why is the inflow of northbound funds widely concerned?
Compared with most Chinese A-share investors, more northbound funds come from international investors, who have a more global perspective and are able to find and predict valuation changes in the Chinese A-share market from fluctuations in the global asset market.
Yang Delong, chief economist of Qianhai Kaiyuan Fund, said that "the stock market is a barometer of the economy", which means that economic recovery is the basis for a strong stock market and an active capital market.
A careful analysis of the stocks currently bought by Beishang Capital in China's A-share market shows that the top 20 are basically high-quality leading companies in various industries, which also fully reflects their investment philosophy - focusing on the fundamentals of the company and focusing on the long-term Investment, try to ignore short-term irrational market fluctuations.
Why is it a consensus to over-allocate Chinese assets?
The domestic and foreign economic cycles are at different stages, and the overseas and domestic economic situations are significantly different, which is one of the main reasons for the current large inflow of northbound funds.
Wei Wei, chief strategist at Ping An Securities, believes that the current overseas economic downturn and recession expectations have fluctuated slightly, but the overall weakening trend remains unchanged; in contrast, China's economic recovery is expected to strengthen, which is due to the gradual implementation of stable growth policies and the impact on the economy. Policy support in multiple industries has increased.
In addition, China's continuous and active measures to open up to the outside world have also promoted the stabilization of the domestic economy.
On February 10, the January 2023 financial statistics and social financing data released by the People's Bank of China showed that credit growth in January achieved a "good start" as scheduled, both the total amount and the structure improved, and the scale of social financing increased significantly.
What deserves special attention is that RMB loans increased by 4.9 trillion yuan that month, a record high in a single month, an increase of 922.7 billion yuan year-on-year.
Wei Wei believes that changes in the currency cycle at home and abroad are another supporting factor for northbound capital inflows.
At present, the Federal Reserve is still in the cycle of raising interest rates, and recent inflation data has also brought expected fluctuations; while in China, from last year to this year, the active and prudent monetary policy has been flexible, moderate, precise and effective, and has continuously increased its support for the real economy.
Therefore, the performance of domestic and foreign equity markets is quite different, and funds will naturally pursue more certain growth.
In addition, with the implementation of the comprehensive registration system, China A-shares will provide investors with more diversified investment targets to meet the risk preferences and sub-sector choices of different investors.
This will provide more opportunities and even bring excess returns to northbound funds seeking global asset allocation to diversify investment risks and realize asset appreciation. This is also one of the reasons for the recent continuous net inflow of northbound funds.
What do northbound funds like to buy?
According to statistics from the Ping An Securities Research Institute, since 2023, the top five industries with net inflows of northbound funds are power equipment and new energy, non-bank finance, food and beverage, electronics, and banking.
In terms of the market value of northbound capital holdings, as of now, the market value of northbound capital holdings in food and beverage, power equipment and new energy industries has exceeded 300 billion yuan, the market value of pharmaceutical and biological holdings has exceeded 200 billion yuan, and banks, home appliances, etc. have exceeded 100 billion yuan .
The industries that are heavily held by northbound funds are also the industries that they focus on increasing their positions.
The latest strategy report released by Goldman Sachs on February 20 pointed out that as China's economic recovery helps corporate profits increase, it is expected that Chinese stocks will face a new upward driving force, and there is still room for an increase of more than 20% by the end of the year.
Liu Jinjin, chief China equity strategist at Goldman Sachs, said the MSCI China Index could reach 85 points by the end of 2023, an increase of about 24% from current levels.
Goldman Sachs pointed out in the report that the Chinese economy will have a direct positive impact on global economic growth through three channels: domestic demand, international travel demand and commodity demand; the gradual recovery of China's foreign service demand, especially outbound tourism, will boost travel The economy of the destination country; in addition, the accelerated recovery of the Chinese economy may boost international commodity demand and prices.
The focus of Chinese stocks will gradually shift from reopening to economic recovery, and the driver of potential gains may shift from multiple expansion to earnings growth.
The growth momentum is mainly tilted towards the consumption economy.
Will the strong inflow of northbound funds have an impact on A shares?
Xie Yaxuan, deputy general manager of the Strategic Research Department of the Research and Development Center of China Merchants Securities, said that by the end of 2022, foreign investors will hold about 4.8% of the value of China's A-shares. That is to say, the main investors of China's A-shares are still domestic investors .
Prior to this, international investors' overall allocation to A shares was in a state of low allocation. Now that China's economy is stabilizing and improving, further increasing allocation is the general trend.
In addition, judging from historical data, the investment of northbound funds pays more attention to long-term value investment, and cross-cycle and diversified asset allocation can play a positive role in the stability of the A-share market.
Zhang Yuewen, a researcher at the Institute of Finance and Economics of the Chinese Academy of Social Sciences, told reporters that since 2020, the maximum value of net buying and selling of Chinese A shares by foreign investors in a single day is only about 20 billion yuan, accounting for only 2% of the highest market turnover. Many foreign institutions and investors make independent judgments based on their different valuation models. The transactions are highly scattered and do not have consistency in action.
Therefore, there are no prerequisites for impacting A shares.
At the same time, it is worth noting that, just like a coin has two sides, investment opportunities always coexist with risks.
At present, various "black swan" and "grey rhino" events, including global geopolitical conflicts, occur from time to time, and uncertain factors may also have an impact on the trend of A shares.
In fact, the monetary policy trends of many overseas developed economies and the liquidity of overseas funds may still be indirectly transmitted to the country, causing disturbances to A shares.
When making investment decisions, investors still need to comprehensively consider multiple factors at home and abroad, focus their analysis on the fundamentals of related industries and individual stocks, not blindly chase ups and downs, and adhere to the concept of long-term value investment.
Can northbound capital inflows continue?
In fact, the reason for determining whether funds will continue to flow in mainly lies in the safety of assets and long-term return expectations.
In the latest China macroeconomic and stock strategy research report, Morgan Stanley Securities further raised China's 2023 GDP growth forecast by 0.3 percentage points to 5.7%.
According to the report, 2023 will be the year when Chinese stocks lead the global market.
The continuous improvement of many key factors, including the effective implementation of a number of economic stimulus measures and the improvement of external unstable factors, supports Morgan Stanley's further bullishness on China.
Wang Ying, chief China equity strategist at Morgan Stanley, said that based on the current exchange rate of the renminbi against the U.S. dollar and the Fed's interest rate hike cycle, it is very important for global investors to allocate Chinese assets denominated in renminbi.
The core assets are investors who have a strong willingness to hold them for a long time, and have good expectations for the safety and long-term rate of return of these assets.
In the framework of China's stock investment, core assets have very good growth in the medium and long term, and can outperform the market in terms of investment returns.
More importantly, these sectors and investment opportunities are complementary to the long-term interests of national economic development.
(Headquarters reporter Zhang Qin Liu Ying Dong Bin)