Capital Flow: Foreign capital is flowing out at an accelerated pace, while inflow from the south is expanding.

Abstract The noteworthy changes in global liquidity this week are as follows: 1) The EPFR fund data we track shows that as of Wednesday of this week (September 11), active foreign funds accelerated outflows from A-shares and overseas Chinese stocks; 2) In terms of the Stock Connect, the trading volume of northbound funds expanded this week, while southbound funds accelerated inflows; 3) Global stocks turned into outflows, bond inflows expanded, and money market inflows slowed down; 4) U.S. stocks turned into outflows, while outflows from Japan, developed Europe, and emerging markets expanded. In the domestic market, foreign funds accelerated outflows, while southbound funds continued to increase. The continued uncertainty in the short-term domestic and international environment has brought about fluctuations. As of Wednesday of this week (September 5-11), foreign funds accelerated outflows from A-shares and overseas Chinese stock markets, with active foreign outflows from A-shares totaling $160 million (compared to $110 million outflows last week), and outflows of $250 million from Hong Kong stocks and ADRs (compared to $210 million outflows last week). In contrast, southbound funds accelerated inflows this week, with average daily inflows of $2.51 billion Hong Kong dollars (compared to $2.32 billion Hong Kong dollars last week). The adjustment of the Hong Kong Stock Connect took effect on September 10, with Alibaba (9988.HK) officially included in the Hong Kong Stock Connect after its dual primary listing, ranking among the top ten most active stocks for four consecutive trading days. Southbound net purchases of Alibaba totaled $16.42 billion Hong Kong dollars this week. In the short term, the flexibility of Hong Kong stocks may still be greater than that of A-shares, but the structural market with volatile intervals in the medium term remains the main theme. On the global funding side, active foreign funds turned into inflows in the Indian market, while U.S. stocks turned into outflows and Japanese stocks saw increased outflows. As of Wednesday of this week (September 5-11), active foreign funds in the Indian market turned into inflows of $40 million (compared to outflows of $100 million last week), U.S. stocks turned into outflows of $230 million (compared to inflows of $680 million last week), and Japanese stocks saw outflows of $730 million (compared to $190 million outflows last week). Main Text Foreign funds accelerate outflows, while southbound inflows continue to increase. Chinese Market Overseas funds: EPFR shows that active foreign funds are accelerating outflows. As of Wednesday of this week (September 5-11), active foreign outflows from A-shares totaled $160 million (compared to $110 million outflows last week), while passive outflows were $260 million (compared to $47 million outflows last week); at the same time, overseas funds in Hong Kong stocks and ADRs saw overall outflows of $350 million (compared to $371.2 million outflows last week), with active funds outflows of $250 million (compared to $210 million outflows last week) and passive funds outflows of $100 million (compared to $170 million inflows last week). Stock Connect funds: Northbound funds stopped disclosing net purchase amounts from August 16 and increased trading volume this week. This week (September 9-13), total northbound trading volume reached 423.5 billion yuan, an increase from 383.9 billion yuan the previous week. In terms of individual stocks, Kweichow Moutai, Contemporary Amperex Technology, Zijin Mining Group, and China Yangtze Power had relatively large trading volumes. Southbound inflows are increasing, with increased holdings in the consumer and mainland bank sectors. This week (September 9-13), a total of 12.53 billion Hong Kong dollars flowed southbound, with daily inflows averaging 2.51 billion Hong Kong dollars (compared to 2.32 billion Hong Kong dollars last week). In terms of industries, the consumer and mainland bank sectors were the most heavily invested, while the energy/raw materials sector saw the most divestment. In terms of individual stocks, southbound funds increased their holdings in Alibaba, China Construction Bank Corporation, Industrial and Commercial Bank of China, while reducing their holdings in Tencent, Meituan, and other stocks. Global Markets Across markets and assets: U.S. stocks turned into outflows, while outflows from Japan, developed Europe, and emerging markets accelerated. In terms of active foreign funds, U.S. stocks turned into outflows of $230 million this week (compared to inflows of $680 million last week), developed Europe saw outflows increase to $1.65 billion (compared to $1.18 billion outflows last week), Japanese stocks saw outflows increase to $730 million (compared to $190 million outflows last week), and emerging markets saw outflows increase to $840 million (compared to $820 million outflows last week). Global stock markets turned into outflows, while bond markets saw accelerated inflows and money markets saw slowed inflows. Allocation ratios: As of July 31, active funds had a lower allocation ratio to China compared to the benchmark by approximately 0.2%. Since 2022, global active funds have shifted from overweight to underweight in China and India, while maintaining overweight in South Korea and seeing a slight decrease in underweight allocation in Japan. Since January 2022, the allocation ratio to China has decreased the most (-0.2%), while the UK (+1.7%), France (+0.4%), and South Korea (+0.2%) have seen the largest increases in allocation. In terms of regions, funds from Europe have been the main outflows, while in terms of sectors, overseas funds are overweight in Chinese healthcare, consumer, semiconductor and hardware, and capital goods sectors, with lower allocations in internet, financial, and real estate sectors. This article is sourced from the WeChat official account "Kevin Strategy Research", written by CICC analysts Liu Gang, Wang Muyao, etc.; GMTEight Editor: Wenwen.