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Trillions of long-term capital “living water” is injected into public funds and foreign capital becomes the main force
Economic Information
In 2021, the A-share market is expected to usher in “running water” of trillions of long-term funds. Industry insiders predict that public offerings will continue to be an important source of funds for the A-share market and dominate the market style, while public offerings and foreign investment will also help strengthen the institutional trend of the market.
Increment of trillions of funds has become the consensus of many brokers.CITIC SecuritiesIt is estimated that in 2021, the net inflow of A-shares will be 700 billion yuan, and public offerings and foreign investment will be the main sources. Private equity and hot money follow market trends and are expected to show a net inflow trend. Insurance equity allocation follows the steady growth of insurance premiums, which is expected to bring in a net inflow of 200 billion yuan; Beijing capital will continue to allocate A shares, with an estimated net inflow of 200 billion yuan.
“In 2020, fund sales will exceed 3 trillion yuan, a record high, which is twice the annual sales volume of the previous round of 2015.” Yang Delong, chief economist of Qianhai Kaiyuan Fund, predicts that this year is still a big year for fund development. The issuance of new funds each year in the next ten years may be around two trillion yuan, which will bring a steady stream of incremental funds to the A-share market. Essence Securities said that more mid- and long-term funds are entering A shares, which also shows from the side that investors’ attitudes towards the equity market are undergoing positive changes, and the concepts of long-term investment and value investment are gradually deepening.
The scope of funds entering the market has been further expanded. On December 30, 2020, the Ministry of Human Resources and Social Security issued the “Notice on Adjusting the Investment Scope of Annuity Funds”, which raised the upper limit of the investment ratio of equity assets. Calculated based on the scale of the existing annuity market, the agency predicts that this move may bring 300 billion incremental capital to the capital market. In terms of insurance capital, the China Banking and Insurance Regulatory Commission previously issued the “Interim Measures for the Management of Insurance Asset Management Products” and its supporting rules to unify relevant rules for insurance asset management products, further enrich the medium and long-term investment tools in the financial market, and encourage insurance asset management companies to be high-quality listed companies Provide more long-term funding.
Foreign capital has continued to increase the allocation of A shares in recent years. Essence Securities predicts that in 2021, the inflow of capital from the north to A shares is expected to reach 200 billion to 280 billion. Liu Ligang, chief economist of Citigroup China, said that in the medium and long term, as investment becomes more convenient, overseas institutional investors will continue to increase the allocation of Chinese yuan assets. It is worth noting that QFII/RQFII, one of the channels for foreign investment to allocate A shares, will also usher in new development. At present, the related businesses of QFII and RQFII registration and settlement system reform in Shanghai and Shenzhen markets have been officially launched.Guotai Junan,CITIC Securities,Huatai Securities、CICCBrokerage agencies and other securities firms have successfully opened the first batch of credit accounts in the A-share market for QFII customers, and completed the first margin trading and securities lending transactions for QFII customers on the A-share main board, the Science and Technology Innovation Board and the ChiNext. “Opening up margin trading and securities lending, improving the mechanism for foreign investors to do long and short positions, and further integrate with the international market will undoubtedly enhance the attractiveness of overseas institutions to enter the market, thereby bringing in a large amount of’living water’ funds and accelerating the process of foreign capital’s allocation of A-share assets.” Kai Securities analyst Chen Mengjie pointed out.
“Asian assets, especially Chinese assets, have the foundation to outperform the global market in 2021.” JPMorgan Asset Management pointed out. Gao Ting, head of the research department of Nomura Orient International Securities, is also optimistic about the new year’s A shares. It is expected that this year may be a year of foreign capital inflows. Morgan Stanley also gives an “overweight” rating to A shares and continues to be optimistic.
In terms of asset allocation, last year the northbound funds increased the allocation ratio of electricity, medicine, basic chemicals, machinery, and food and beverage. Among them, the pharmaceutical and electricity sectors are most favored by foreign investors. QFII/RQFII preferences are different. They mainly increase the allocation of information technology and healthcare industries, and significantly reduce the allocation of optional consumer industries. Entering 2021, the agency expects that foreign capital still prefers industry leaders in medicine, food and beverage, machinery, chemicals, and electronics.
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