As of the end of 2022, the Hu-Shen 300 index, reflecting the performance of the top 300 stocks on the Shanghai and Shenzhen stock exchanges, has experienced a significant decline in its weight within the total public fund equity investmentsFrom a dominant 64.18% at the end of 2020, it has now dwindled down to 50.22%. This 2022 dip in investment reflects a broader trend of reallocating capital amid fluctuating performance and investor sentiments.
On July 24, 2023, a pivotal meeting was held which addressed the encouragement of capital market activity and aimed at bolstering investor confidenceThe implications of this call to action stimulated a positive outlook among investors regarding the A-share market, particularly the Hu-Shen 300 index.
Between July 24 and August 4, the Hu-Shen 300 index witnessed a promising rise of 5.20%. Correspondingly, the Hu-Shen 300 ETF saw its share and net asset values increase by 11.03% and 20.25%, respectively, outperforming the overall stock market ETFs by approximately 9.66 percentage points in share growth and 12.99 percentage points in net asset growth for the same periodAdditionally, the proportion of holdings by northbound capital in this sector rose from 4.68% to 4.80% during this window.
The Hu-Shen 300 index, a representation of quality A-share assets, has undergone more than two years of adjustment after reaching a historical high in Q1 of 2021. The number of stocks listed under the Science and Technology Innovation Board within the index has increased from four to fifteen, indicating a shift in the index composition towards more growth-oriented sectors.
Despite this apparent recovery and shifts in composition, public funds have generally decreased their allocations in the Hu-Shen 300 sector
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The dramatic shift from 64.18% at the end of 2020 to just over 50% in 2022 reveals a cautious attitude amongst public fund managers, even as certain sectors such as power equipment and electronics experienced significant increases in their allocations during the same timeframe.
If the anticipated optimism surrounding the capital market is confirmed, public funds may have the capacity to selectively increase their positions in related assetsAs of the end of Q2 2023, public fund accounts held a staggering total of 5.37 trillion yuan in cash assets, with equity funds (including stock and mixed types) accounting for 463.2 billion yuan.
The data regarding ETF tracking the Hu-Shen 300 index illustrates this furtherAs of August 4, there are 22 Hu-Shen 300 ETFs available in the market with a combined share scale of 65.3 billion units, reflecting an 11.03% increase since the announcement on July 24. Their net asset value has surged from 167.4 billion yuan to 201.3 billion yuan, a notable 20.25% rise.
When compared to overall stock market ETFs, the Hu-Shen 300 ETFs are expanding significantly faster, indicating stronger investor momentumIn the same period, the total share size of the stock market ETFs increased marginally from 1.13 trillion to 1.15 trillion units, marking a growth of just 1.37%. The total net asset value for these ETFs rose from 1.26 trillion to 1.35 trillion yuan, translating to a 7.26% increase.
Among the stock ETFs that expanded the most in absolute terms during this period, four of them were Hu-Shen 300 ETFsThe Huatai-PineBridge Hu-Shen 300 ETF, for instance, increased its net asset size from 78.27 billion to 98.65 billion yuan, leading the pack in growth with a 20.38 billion yuan increase.
When comparing share size growth from the end of Q2 to August 4, we see a remarkable 17.66% increase in Hu-Shen 300 ETFs—outpacing the overall market ETF growth by more than 13.79 percentage points
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Day-to-day trading data from July 24 to August 4 indicates an average daily trading amount of 6.7 billion yuan for Hu-Shen 300 ETFs, marking a substantial 71.79% increase compared to the average daily trading amount of 3.9 billion yuan during the first half of 2023. For context, the average daily trading amount for all stock ETFs during the same period grew only by 14.25% from 46.3 billion to 52.9 billion yuan.
This bullish activity denotes a more responsive market for the Hu-Shen 300 index following the encouraging rhetoric communicated by authorities, even though for most of the quarters since Q1 2021, the growth in Hu-Shen 300 ETF shares lagged behind that of the overall market.
From 2021 Q2 until Q2 2023, across nine reporting periods, the Hu-Shen 300 ETF experienced four quarters of negative growthComparatively, only one such incident pertained to the overall stock ETFs, which reflects a contrast in the resilience of investor sentiment towards broader market dynamicsEven in the positive growth phase of Q2 in 2023, the Hu-Shen 300 ETF's growth rate lagged behind by 8.53 percentage points.
Overall, from the end of Q1 2021 to the end of Q2 2023, the Hu-Shen 300 ETF share size increased from 33.7 billion units to 55.2 billion units—a growth of 63.80%. In contrast, the total share size of all stock ETFs surged from 498.1 billion to 1 trillion units, pegging their growth at 100.98%. While the Hu-Shen 300 index accounted for 6.89% of total stock ETF holdings, this figure has now dipped to 5.51%.
Institutional investors have demonstrated a strong bias toward Hu-Shen 300 ETFsBy the end of 2022, they held an impressive 82.29% of the total 55.9 billion units in Hu-Shen 300 ETFs, compared to a considerably lower 56.55% among all stock ETFs, which totaled 801.3 billion unitsFor the twenty similar funds disclosing their 2022 annual reports, six had over 90% holdings from institutional investors.
This revelation illuminates a concentrated belief among institutional stakeholders that the recent directives to invigorate the capital markets will translate into enhanced opportunities within the Hu-Shen 300 index.
However, based on historical data, relying solely on growth in ETF accommodation shows limited capability to shift the overall market trend
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Estimates using the August 4 Hu-Shen 300 ETF scale imply that allocating all assets to the index only accounts for 0.51% of the total circulating market value of 39.73 trillion yuan.
Moreover, concerning investor control, there has been a general downward trend in public fund engagement with the Hu-Shen 300 index since Q1 2021. At the end of 2021, public funds' holdings in the sector equated to 9.22% of the total circulating market value, dropping to 8.67% by the end of 2022—marking a 0.55% decline.
As noted in weighty stock data, by Q4 2022, value held by public funds in the Hu-Shen 300 index fell from 2.06 trillion yuan to 2.02 trillion yuan by the end of Q1 2023, with an additional drop to 1.92 trillion yuan by the end of Q2, corresponding with respective returns of 4.63% and -5.15% on the Hu-Shen 300 index during these periods.
From the public fund's asset allocation perspective, the relevance of the Hu-Shen 300 index continues to declineIn 2020, public fund holdings valued 3.38 trillion yuan, representing 64.18% of total equity assets worth 5.27 trillion yuan, decreasing to 54.01% in 2021 and plunging to 50.22% by end of 2022.
More so, examining the heavy stock data again, public funds' substantial holdings followed a similar descending trend, moving from 2.06 trillion yuan in Q4 2022 to 1.92 trillion yuan by the end of Q2 2023.
Nevertheless, if public funds confirm their optimistic expectations towards the Hu-Shen 300 index, they may still enhance their asset allocation in this regardRecent data indicates that public funds have ample liquidity, possessing a total of 5.37 trillion yuan in cash, with 463.2 billion yuan positioned within equity funds as of the end of Q2.
Delving deeper into the sector allocation within Hu-Shen 300 shows that as of the end of Q2, the foremost sectors being heavily weighted include food and beverages at 17.99%, power equipment at 16.30%, and the electronics sector at 10.46%. These top three categories reflect a slight reshuffling, with the pharmaceuticals sector slipping to fourth place from third, and both food and power experiencing marginal declines in weightage.
The second quarter demonstrated significant weight increases in telecommunications, home appliances, national defense, automotive, and media sectors, offsetting declines observed in transportation and computing industries.
Historical data further illustrates the persistent decline in public funds’ stock proportions held in the food and beverage sectors, which peaked at the end of 2020 and exhibited a downward trend through to the end of 2022.
Conversely, the automotive and national defense sectors have seen a steady rise in the last three years, indicative of a shifting focus among institutional investors.
As of August 4, northbound capital held about 1.91 trillion yuan in Hu-Shen 300 stocks, constituting 4.80% of the total market value for the index
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