Zhongjin: Southbound records the largest inflow since the beginning of 2021, with trading volume maintaining at 30%.

CICC released a research report stating that the changes in funding this week worth noting are: 1) EPFR data shows that as of this Wednesday (February 26), active foreign capital continued to flow out of the Chinese market, while passive foreign capital inflow slowed slightly; 2) Regarding the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, the daily average trading volume of northbound funds increased compared to last week, and southbound funds accelerated inflow, reaching a new high since January 2021; 3) Global stocks, bonds, and currency markets are accelerating inflow; 4) Inflows to US stocks are expanding, while outflows from emerging markets are also expanding. CICC's main points are as follows: In terms of domestic funding, southbound funds accelerated inflow. This week, southbound funds continued to increase significantly to 74.97 billion Hong Kong dollars, reaching the second highest weekly inflow since the opening of the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, second only to the week of January 22, 2021, with daily net inflows exceeding one hundred billion Hong Kong dollars. Overall, this week, the southbound trading ratio maintained at 30%, and the Southbound holding value accounts for approximately 10% of the total market value of stocks listed on the Hong Kong Stock Exchange. At the individual stock level, this week saw significant southbound capital inflows into Alibaba, China Mobile Limited, Xiaomi, and NIO, among others, and outflows from Meituan, CNOOC, etc. Among these, Alibaba continued to see a significant inflow of 18.8 billion Hong Kong dollars this week, accounting for one-quarter of the total net inflow of southbound funds for the week, and Alibaba's southbound holdings also increased from 5.8% as of last Friday to 6.7%. Chart: Accelerated Inflow of Southbound Funds Data source: EPFR, Wind, CICC Research Department; Data as of February 28, 2025 Foreign capital continues the previous trend, with a slowdown in passive foreign capital inflow and continuous outflow of active capital. As of this Wednesday (February 26), for the Hong Kong stock market: 1) Passive capital (ETF) inflow has slowed down, with the inflow of passive foreign capital into Hong Kong stocks and ADRs slightly decreasing from 910 million US dollars last week to 890 million US dollars, with a focus on funds specifically in emerging markets (418 million US dollars) and Chinese concept stocks (561 million US dollars). 2) Outflows from active funds (mainly long-only) have narrowed, with outflows primarily from funds focusing on emerging markets, but at the same time, there has been a significant increase in inflows from funds focusing on Asia excluding Japan, with funds focusing on the Pacific region changing from outflows to inflows. Compared to this, passive foreign capital has turned from inflow to outflow for A-shares, while the outflow of active foreign capital has slowed down. Chart: Passive Foreign Capital Turns to Outflow for A-shares, Outflow of Active Foreign Capital Slows Data source: EPFR, Wind, CICC Research Department Chart: Continued Outflow of Active Foreign Capital for Hong Kong + ADR Global funding situation: Inflows to US stocks accelerate, inflows to Japanese stocks, and a slowdown in outflows from India. As of this Wednesday (February 20-26), the outflow of active foreign capital from the Indian market has narrowed to 170 million US dollars (compared to an outflow of 510 million US dollars the previous week), inflows to US stocks have significantly expanded from an inflow of 1.45 billion US dollars the previous week to 27.872 billion US dollars, and Japanese stocks have turned to inflow at 1.897 billion US dollars (compared to an outflow of 138 million US dollars the previous week). Active foreign capital continues to flow out, passive fund inflow slows down; accelerated inflow of southbound funds Overseas funding: EPFR shows that the outflow of active foreign capital has slowed down, while the inflow of passive funds has slightly decreased. As of this Wednesday (February 20-26), the outflow of active foreign capital from A-shares has slowed to 65 million US dollars (compared to an outflow of 130 million US dollars the previous week), and passive funds have turned to an outflow of 106 million US dollars (compared to an inflow of 430 million US dollars the previous week); at the same time, the overall inflow of overseas funds for Hong Kong stocks and ADRs has slightly decreased to 670 million US dollars (compared to an overall inflow of 680 million US dollars last week), with active capital turning from an outflow of 230 million US dollars the previous week to an outflow of 220 million US dollars, and passive funds decreasing from an inflow of 910 million US dollars the previous week to 890 million US dollars. Chart: Active Foreign Capital Continues to Flow Out of A-shares, Passive Foreign Capital Turns to Outflow Interconnection funding: Since August 16, 2024, northbound funds have stopped disclosing net purchases, and the daily average transaction amount of northbound funds has increased compared to last week. This week, the trading volume of northbound funds is approximately 240.81 billion RMB, a slight increase from the daily average transaction amount of 218.16 billion RMB last week. In terms of individual stocks, Contemporary Amperex Technology, BYD Company Limited, Kweichow Moutai, and Cambricon have the largest transaction volumes. Chart: Weekly Average Transaction Amount of Northbound Funds Significantly accelerated southbound influx. This week, southbound funds flowed into Hong Kong stocks at 74.97 billion Hong Kong dollars, with a daily average inflow of 14.99 billion Hong Kong dollars, a significant increase from the daily average inflow of 10.242 billion Hong Kong dollars the previous week. At the individual stock level, there were significant inflows into Alibaba and China Mobile Limited this week, while outflows from Meituan and CNOOC. At the industry level, southbound funds increased their holdings in consumption and Mainland banks, while reducing their holdings in energy and raw materials, among others. Chart: Changes in Southbound Funds Holdings this Week Accelerated inflows into global stocks, bonds, and currency markets; significantly expanded inflow into US stocks, accelerated outflows from emerging markets Cross-market and cross-asset: Accelerated inflows into US stocks, inflows into Japanese and developed European markets, and accelerated outflows from emerging markets. In terms of active foreign capital, inflows into US stocks significantly increased this week to 27.872 billion US dollars (compared to an inflow of 1.454 billion US dollars the previous week), inflows into developed European markets turned to 2.041 billion US dollars (compared to an outflow of 1.319 billion US dollars the previous week), inflows into Japanese stocks turn to 1.897 billion US dollars (compared to an outflow of 138 million US dollars the previous week), and outflows from emerging markets accelerated to 5.065 billion US dollars (compared to an outflow of 1.305 billion US dollars the previous week). From a cross-asset perspective, there have been accelerated inflows into global stocks, bonds, and currency markets. Chart: Weekly Net Purchase Situation of Global Stocks, Bonds, and Currency Market Funds Allocation ratios: As of January 31, 2025, the allocation ratio of various types of major active funds globally to China is approximately 1.23 percentage points lower than the benchmark, a decrease from 1.1 percentage points underweight as of the end of January. In terms of allocation ratios, globally-focused active funds have slightly increased their allocation to Germany (+0.13 percentage points), France,...There was a significant increase in allocations, with the United States and Japan reducing allocations more. In terms of ultra-low allocations, Germany, Japan, and the United Kingdom saw more increases in January, while the United States, Australia, and South Korea saw more decreases. In terms of region, fund managers from Europe were the main outflow source. In terms of sectors, overseas funds were overweight in Chinese healthcare, consumer, semiconductor and hardware, and capital goods, but underweight in internet, finance, and real estate.Chart: Proportion of active funds allocated to China and India declining, while underweight proportion for Japan is slightly decreasing.