Semi-Month Shift: Zhongxin's Stock Holdings and Future Market Flow

In the past 10 trading days, SMIC has disclosed two announcements regarding the increase and decrease of its stock holdings by the Yifangda SSE STAR 50 ETF. Although these actions are driven by reasons such as changes in the size of the fund and the investment strategy of ETFs to track index constituent stocks, they actually show that market funds are adjusting their layout direction, from rushing in to "sweep up goods" to a significant net redemption exit, and the trading heat has also dropped significantly.

According to the First Financial Statistics, on October 23, the total transaction volume of the stock ETF market was 116.624 billion yuan, which is almost "halved" compared to 226.307 billion yuan at the end of September. At the same time, in the nearly 8 trading days ending on the 22nd, there were 7 trading days of net outflow in stock ETFs, with a cumulative net outflow of funds reaching 83.617 billion yuan. The Yifangda SSE STAR 50 ETF involved also showed changes similar to the industry as a whole.

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"The bottom of A-shares may have been established, and the future is expected to be long-term positive, maintaining a positive and optimistic attitude towards the future market." Standing at the current point, Mo Haibo, deputy general manager and fund manager of Wanjia Fund, said to the First Financial that A-shares are unlikely to have a "crazy bull" like in 2015, and are more likely to be a slow bull market based on the continuous recovery of the economy and confidence. As the first wave of sharp rises in the market ends, the market may enter a structural differentiation market that fluctuates upwards.

In the view of Leng Chuanshi, a stock strategy analyst at Harvest Fund, the current market fluctuations are still very large, mainly dominated by emotional and confidence fluctuations in the market. He said to the First Financial: "It is not wise to frequently change positions during the index market. The market will usually have a rapid rotation, and many sectors will eventually rotate. Therefore, it is recommended that investors be patient in the first stage. In the second stage, when the structural main line appears, some structural balance and adjustment can be made on the basis of the original, focusing on directions with more explosiveness."

The increase and decrease are separated by less than half a month.

On the evening of October 22, SMIC (688981.SH) announced that the Yifangda SSE STAR 50 ETF reduced its domestic stock holdings by 1.2465 million shares on October 21, and by then, the fund held a total of 99.2407 million domestic shares, accounting for 4.99% of the company's total domestic share capital. If calculated roughly based on the closing price of SMIC on that day (97.48 yuan/share), the amount of reduction this time is 122 million yuan.

It is worth noting that this is less than 10 trading days after the Yifangda SSE STAR 50 ETF "passively raised a plaque" for SMIC. On October 10, the product increased its domestic stock holdings of SMIC by 9.6162 million shares, causing the holding ratio to exceed the "plaque line" of 5%. Combining the semi-annual report data, after a round of increase and decrease, the Yifangda SSE STAR 50 ETF still increased by 26.0971 million shares in the second half of the year.

In the view of industry insiders, whether it is the "plaque raising" of this ETF product or the reduction of the company, it is different from the situation where the fund manager actively adjusts the position due to expectations for a certain company. It is mainly due to changes in the size of the fund, and the ETF's passive tracking of the index weight investment strategy, so it is necessary to adjust the holdings of the weighted stocks of the target index.

According to the announcement, the Yifangda SSE STAR 50 ETF mainly adopts a complete replication method, closely tracking the target index, that is, the SSE STAR 50 constituent index, and pursuing the minimization of tracking deviation and tracking error as the investment goal. SMIC is the largest weight stock of its target index, accounting for 9.87%, so the change in holdings is based on the fund's investment strategy.

In fact, the situation where ETF products "raise a plaque" for listed companies due to the increase in scale, and then repeatedly announce stock changes due to changes in scale, has also occurred in the past. For example, in December 2022, the China Securities Regulatory Commission's SSE STAR 50 ETF once "raised a plaque" for SMIC for similar reasons, and then increased or decreased due to this reason, and issued 5 prompt announcements one after another.Public information indicates that SMIC is the first wafer foundry company in mainland China to achieve mass production of 14-nanometer FinFET, representing the most advanced level of independently developed integrated circuit manufacturing technology in mainland China. On October 21st, SMIC's A-share stock price broke through the 100 yuan mark, reaching a peak of 107.76 yuan, setting a historical record. In the following two days, the stock experienced a slight decline, with a closing price of 92.31 yuan on the 23rd. Since then, the stock has accumulated a 112.55% increase since the market rebounded on September 24th.

Looking at the semi-annual report, the company's operating income was 26.269 billion yuan, a year-on-year increase of 23.23%; the net profit attributable to the parent company was 1.646 billion yuan, a year-on-year decrease of 45.07%. In terms of profitability, the gross margin for sales in the first half of the year was 13.91%, a decrease of 8.53 percentage points compared to the same period last year (21.89%); the net profit margin for sales was 6.25%, a reduction of 11 percentage points compared to 17.25% in the same period last year.

As of the end of the second quarter this year, the Huaxia SSE Science and Technology Innovation Board 50 ETF remains the largest circulating shareholder of SMIC, holding a share ratio of 8.37%; in addition, the Easy Fund SSE Science and Technology Innovation Board 50 ETF, Huaxia National Semiconductor Chip ETF, and Huaxia SSE 50 ETF are the third, fifth, and sixth largest shareholders of the company, respectively.

From "sweeping up" to a significant exit

The announcements of increases and decreases in holdings by SMIC in the short term are due to changes in the scale of related ETFs, which actually reflect a change in the direction of market capital allocation. Many ETF products have shifted from capital inflow to net redemption, with a clear sign of securing profits. Data shows that after the market correction on October 8th and 9th, the 10th marked a watershed for the shift in capital, and the trading heat also dropped significantly.

According to the First Financial statistics, from September 24th to October 10th, the speed of various funds flowing into stock ETFs showed an inverted "V" shape, with daily net inflows exceeding ten billion yuan, among which the highest point was reached on September 30th, with a net inflow of 92.143 billion yuan, followed by a slowdown, and the net inflow on the 10th had dropped to 2.242 billion yuan. Since the 11th, stock ETFs have shifted from net inflow to net outflow.

Wind data shows that from October 11th to 22nd, stock ETFs have seen a net outflow of 83.617 billion yuan, while the net inflow in the first eight trading days ending October 10th reached 274.371 billion yuan. On October 23rd, the total transaction volume of the entire stock ETF market was 116.624 billion yuan, almost "halved" (-48.47%) compared to 226.307 billion yuan on September 30th.

The Easy Fund SSE Science and Technology Innovation Board 50 ETF involved in this event is also similar, shifting from attracting 15.142 billion yuan in funds in the previous stage to a net outflow of 6.941 billion yuan in the later period. Its transaction volume also dropped from 6.369 billion yuan on September 30th to 2.829 billion yuan on October 23rd, a reduction of 56%, and the turnover rate fell by more than 60%.

Overall, looking at the indices tracked by ETFs, ETFs related to the CSI 1000, ChiNext Index, and SSE 300, which previously attracted a large amount of capital, have shown a clear trend of redemption, with a net redemption of more than 15 billion yuan in the period; in addition, ETF products in the direction of the STAR 50, CSI 500, and ChiNext 50 also have a net outflow of funds exceeding 5 billion yuan.

It is worth noting that while a large amount of capital is leaving, the first batch of CSI A500 ETFs listed on October 15th have attracted market attention, maintaining a net inflow of more than 1.5 billion yuan for six consecutive trading days. As of October 22nd, these ten products have received a net subscription of 13.872 billion yuan, and the total net asset value has increased to 36.819 billion yuan.From the perspective of theme industries, the net outflow pace of ETF products related to securities firms, semiconductors, and chips continues. For instance, since September 24th, the ETFs such as the Guotai Zhongzheng Securities Company ETF and the Guolian An Zhongzheng Semiconductor ETF have experienced net outflows of 10.122 billion yuan and 6.292 billion yuan, respectively, with the corresponding interval returns being 40.55% and 60.21%.

Where will the funds flow in the future market?

In the view of industry insiders, the trading heat in various industries has declined to varying degrees, but the game on the market trading level is still quite obvious. A research and investment person from a Shanghai-based institution told Yicai: "The rotation rhythm between various hot spots is still relatively fast. Overall, it is appropriate to view the current market as a structure that fluctuates upwards. It is recommended to look for opportunities to buy low and profit from arbitrage during the rotation of hot spots."

Liu Zhongteng, Assistant Fund Manager of the Equity Research Department of Golden Eagle Fund, told Yicai that after the A-share market introduced a monetary combination punch following the September 24th meeting, the Shanghai Composite Index rose sharply from 2700 points to 3670 points in just over 10 trading days. The heavyweight stocks have completed their mission of setting the stage and warming up the market. After the pullback, the Shanghai Composite Index is expected to continue to show a wide range of fluctuations.

In Liu Zhongteng's view, small-cap thematic stocks are expected to usher in an active performance period, with the biggest theme being self-controllability. Secondly, attention can also be paid to areas that have been highly valued at the national level and supported by policies in recent times, such as low-altitude economy, data elements, and commercial aerospace, all of which represent new directions for the future upgrading of China's technology industry.

Mo Haibo also believes that looking back on this round of the market, policy is the biggest driving force. Several meetings completely changed the market's expectations for policy, thereby changing expectations for the economic fundamentals and liquidity. With the reversal of confidence and the implementation of future fiscal policies, the economic fundamentals are expected to stabilize and rebound. In terms of style, he still favors technology growth assets, which have greater room for valuation repair during the process of market confidence recovery. In addition, he also actively pays attention to the seed industry, whose fundamentals are improving, and other sectors that are worth laying out on the left side after being oversold.

So, at the current point, how should we view market opportunities? The aforementioned analyst, Leng Chuanshi, told Yicai that the current market rise is not just a short-term rebound but may be a medium to long-term reversal. The driving forces for the future include the recovery of economic confidence and the expansion of market liquidity. At the same time, the entry of new investors and the development of emerging industries may also become important clues for structural market trends.

"It is necessary to observe the elasticity of economic repair and the degree of liquidity expansion to judge the long-term trend of the market," Leng Chuanshi said. Even when many people are optimistic about the market during the overall rise, there will also be adjustments on a single day or for several consecutive days. Therefore, it is important not to chase high but to buy low from a medium-term perspective. He emphasized again that it is essential to make reasonable asset allocation according to one's own risk tolerance, investment objectives, and available funds.