As the recent quarterly reports from public funds emerge, the latest scale of stock exchange-traded funds (ETFs) has come to lightDuring the first quarter of this year, broad-based ETFs have garnered considerable attention from capital markets, particularly the ones tracking the CSI 300 index, which have seen substantial growth in scaleNotably, three of these ETFs have already surpassed a threshold of one trillion yuan in assets under management, a significant marker of investor confidence and interest.
Alongside the CSI 300 ETFs, other broad-based ETFs, such as those based on the Shanghai 50 index, the STAR 50 index, and ChiNext, have also reported impressive increases in their sharesFurthermore, a number of dividend ETFs have outpaced several industry-specific thematic ETFs in terms of share growth, indicating a shift in investor focus towards consistent returns.
The dominance of broad-based ETFs over sector-specific ones can be attributed to the turbulent market conditions encountered at the beginning of the year
Investors found large-cap blue-chip stocks, which usually have lower valuations compared to higher-valued growth stocks, to be more appealingAn analysis of last year’s annual reports, coupled with this year’s quarterly disclosures, suggests that entities like Central Huijin have made significant purchases of these broad-based ETFs during the first quarterThis raises the question of whether the current market preference still leans towards large-cap blue-chip stocks.
Broad-Based ETFs Surge in Scale
The CSI 300 ETF has emerged as one of the most sought-after products in the market todayBased on the quarterly reports from public funds, the CSI 300 ETFs managed by firms such as Huatai-PB, E Fund, and Harvest have all exceeded one trillion yuan in scale, while the CSI 300 ETF under China Asset Management is rapidly approaching that same milestone
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Notably, four major players in the ETF space have reported a collective share growth exceeding 100 billion yuan during the first quarter for their CSI 300 ETFsThe Shanghai 50 ETF overseen by Huaxia Fund has also witnessed a similar share growth trajectory.
The CSI 300 and Shanghai 50 indices serve as benchmarks for large-cap blue-chip stocks within the marketAs the market experienced significant fluctuations at the beginning of the year, capital first flowed into these blue-chip stocks before branching out into mid-cap indicesIn the first quarter, several ETFs tracking the CSI 1000 and CSI 500 indices reported share increases surpassing 20 billion yuanAdditionally, growth-oriented ETFs such as the STAR 50 and ChiNext ETFs have also seen a significant uptick in their share volumes, coming behind only the Shanghai 50 ETF in terms of growth.
Multiple dividend-focused ETFs also observed substantial share growth during the first quarter, ranking them just behind the various broad-based ETFs
Dividend indices typically encompass stocks with high dividend yields, often comprising state-owned enterprises and central government corporations.
In stark contrast, growth-themed ETFs, which previously attracted substantial investor attention, have now become less desirableData indicates that sector-specific ETFs focused on industries such as semiconductors, liquor, pharmaceuticals, military, and new energy vehicles faced considerable reductions in their share volumes during the quarterMany of these ETFs are aligned with growing industries, yet the performance of their underlying stocks was generally mediocre, with numerous component stocks experiencing significant price dips.
From a performance perspective, ETFs linked to resources, state-owned enterprises, and banks displayed robust gains during the quarter, whereas thematic ETFs such as those tied to biotechnology and related sectors lagged behind.
Continued Inflows from Large Institutions
Broad-based ETFs have been consistently absorbed by considerable capital flows during times of market downturns, with Central Huijin Company among the major contributors
On October 23, 2023, Central Huijin publicly announced its purchases of ETFs and subsequently signaled further increases in these holdingsBy February 6, 2024, they reiterated their recognition of the value in A-shares at that time and expanded their ETF holdings significantly.
Based on quarterly data, one particular investor held more than 20% of the Huatai-PB CSI 300 ETF at the end of the first quarterThis institution possessed approximately 6.247 billion shares at the beginning of the quarterNotably, Central Huijin held the same amount according to the previous year's annual report, positioning it as the largest shareholder among listed fund holdersThis leads us to surmise that this entity might indeed be Central Huijin itself, as they also acquired 26.356 billion shares of the Huatai-PB CSI 300 ETF during the first quarter, ending with 32.603 billion shares.
From the data regarding the Huatai-PB CSI 300 ETF, one can infer the buying patterns of other similar funds, including three other CSI 300 ETFs and one Shanghai 50 ETF
According to calculations, it is likely that the "institution" attributed to Central Huijin purchased 15.604 billion shares of the Harvest CSI 300 ETF, 16.993 billion shares of the Huaxia CSI 300 ETF, 45.706 billion shares of the E Fund CSI 300 ETF, and 15.867 billion shares of the Huaxia Shanghai 50 ETF in the first quarterThroughout this period, this single institution did not engage in redeeming shares, only adding to its positions in the cited ETFs.
With large-scale capital inflows favoring broad-based ETFs, it is clear that these have become the mainstay of this year's equity market offeringsAs of April 22, data from Choice indicates that a total of 48 ETFs have been issued this year, amounting to 31.07 billion yuan in issuance excluding QDII funds, while the total volume for stock-based funds stands at only 37.376 billion yuanAmong these, the most focal on investors are the CSI A50 ETF and the dividend-themed ETFs, with several of the former exceeding 1 billion yuan issuance and the latter holding a significant share within the thematic ETF sphere.
What Direction Will Market Trends Take?
Currently, the market has transitioned from a rebound phase to a phase of stabilization and fluctuation
Some industry experts believe that ETFs tracking large-cap stocks remain relatively more favored, while growth-oriented ETFs warrant patience for potential regulatory catalysts to bolster interestA particular fund manager shared in an interview that their strategy involves primarily favoring large-cap ETFs, while also incorporating some mid-and-small-cap focused products as a complementary feature.
Recent research from Huabao Securities has underscored a preference for large-cap stocks, noting that historically, the April earnings season exhibits strong seasonal patterns where large-cap indices significantly outperform their smaller counterpartsFrom a capital flow perspective, indicators derived from industrial capital and northbound fund investments highlight a strong bias toward large-cap stocks.
Furthermore, regarding investment opportunities within thematic sector ETFs, the report pointed out that ongoing “replacement” policies could generate lucrative opportunities across corresponding industrial chains.
Jiang Han, a senior researcher with Pangu Think Tank, indicated that the substantial influx of funds into broad-based ETFs during the first quarter reflects a positive sentiment towards market recovery and valuation adjustments among investors