The changes to be noted in the face value of global funds this week are: 1) According to the EPFR fund data we track, as of Wednesday (October 16th), active foreign investment has once again turned into outflows after a two-week gap; 2) In terms of interconnectivity, the daily average transaction volume of northbound funds has narrowed this week, while the inflow of southbound funds has accelerated; 3) Global stock market inflows have narrowed but bond inflows have expanded, while currency markets have shifted towards outflows; 4) The inflow of US and European markets has accelerated, but the outflow of Japanese stocks has expanded.
In the domestic market, active funds have flowed out again after two weeks, and passive fund inflows have also slowed down significantly. After experiencing a sharp rise in Hong Kong and Chinese concept stocks from the end of September to the National Day holiday, the market has significantly cooled down in the past two weeks, and so has foreign investment. We have analyzed the flow of foreign capital during the rebound process in multiple reports such as "How much room is left after a sharp rise?" and "Which foreign capital is the main inflow.
Recently, with the market beginning to rebound and consolidate, passive capital inflows have significantly slowed down this week, only about 1/4 of the previous week, indicating a cooling of the previously excited emotions of non institutional investors. At the same time, the more noteworthy active funds (long-term institutional LO, with a stock size of 80%) experienced a slight inflow for two weeks and then flowed out again, which also confirms our judgment that the initial LO inflow was mainly aimed at reducing underallocation and preventing significant underperformance, while systematic allocation and even over allocation still require more conditions and stronger expectations. From the perspective of domestic capital, the southward capital inflow accelerated and mainly favored banking and telecommunications services, but the sale of Meituan, Hong Kong Stock Exchange and Kwai and other targets that had led the rise in the early rebound process indicated that there might also be some profit taking.
On the global capital front, the inflow of US stocks has accelerated, the outflow from the Japanese market has expanded, and the outflow from the Indian market has narrowed. As of Wednesday of this week (October 10-16), the active outflow of foreign capital from the Indian market narrowed to $30 million (vs. last week's outflow of $150 million), while the inflow of US stocks continued and expanded to $1.24 billion this week after last week's inflow of $910 million, and the outflow of Japanese stocks expanded to $330 million (vs. last week's outflow of $230 million).
Chinese market: Active foreign investment flows out again, passive foreign investment inflows narrow; Southward inflow acceleration
Overseas funds: EPFR's proactive foreign investment has once again turned into outflows after two weeks. As of Wednesday of this week (October 10-16), active foreign investment in A-shares has turned into an outflow of $100 million (vs. last week's inflow of $200 million), and passive capital inflow of $1.15 billion (vs. last week's inflow of $4.1 billion); At the same time, the overall inflow of Hong Kong stocks and ADR overseas funds was 1.06 billion US dollars (vs. last week's inflow of 4.44 billion US dollars), of which active funds were converted into outflows of 190 million US dollars (vs. last week's inflow of 200 million US dollars), and passive fund inflows significantly narrowed to 1.25 billion US dollars (vs. last week's inflow of 4.24 billion US dollars).
Interconnected funds: Northbound funds have stopped disclosing net purchase amounts since August 16th, and the average transaction volume has narrowed this Sunday. This week (October 14-18), the daily average transaction amount of northbound funds reached 240.8 billion yuan, a decrease from last week's 401.6 billion yuan transaction amount.
The southward inflow is accelerating, with mainland banks, telecommunications services, and other sectors experiencing the highest inflow. This week (October 14-18), the total inflow of southbound funds was HKD 24.42 billion, with an average daily inflow of HKD 4.89 billion, which is an expansion compared to the previous week (with an average daily inflow of HKD 4.0 billion from October 8-10). At the industry level, mainland banks and telecommunications services sectors received the most southbound capital inflows last week, while diversified finance and software and services sectors experienced overall outflows.
Global markets: Global stock market inflows have narrowed, bond market inflows have expanded, and money market outflows have shifted; US stock inflows accelerate, emerging markets turn to outflows
Cross market and asset: US stock inflows are accelerating, while emerging markets are shifting towards outflows. From the perspective of active foreign investment, the weekly inflow of US equity accelerated to $1.24 billion (vs. last week's inflow of $910 million), the outflow from developed Europe increased to $1.29 billion (vs. last week's outflow of $870 million), the outflow from the Japanese stock market expanded to $330 million (vs. last week's outflow of $230 million), and the outflow from emerging markets turned to $770 million (vs. last week's inflow of $60 million). Overall, global stock market inflows have narrowed, bond market inflows have expanded, and money market outflows have shifted.
Allocation ratio: As of August 31st, the active fund's allocation ratio to China is about 0.1% lower than the benchmark. Since 2022, active funds invested globally have shifted from over allocation to under allocation in China and India, while South Korea still maintains over allocation and Japan's under allocation has decreased. From January 2022 to August 31, 2024, China's allocation ratio has decreased significantly (-0.2%), while the UK (+1.8%), France (+0.5%), and Japan (+0.3%) have experienced the largest increase in allocation. In terms of regional types, funds managed by European investors are the main force for overall outflows; At the sector level, overseas funds are over allocated to China's healthcare, consumption, semiconductors and hardware, capital goods, and under allocated to the Internet, finance, and real estate.
