Sinolink: Both equity ETFs and northbound flows saw notable inflows, while margin financing continued to show large net outflows.

Sinolink released a research report stating that, overall, leverage funds represented by margin financing continued to see large net outflows, but with last Friday's rebound the maintenance guarantee ratio recovered somewhat; accordingly, equity ETFs remained the market's main supporting force, while northbound flows and active equity funds both saw some phased return inflows. The market may still face repeated trading fluctuations in the current phase, and going forward attention still needs to be paid to whether margin financing can gradually stabilize and return, as well as the sustainability of return inflows from other participants. Sinolink's main views are as follows: Macro liquidity: Last week the US dollar index edged lower, and the degree of "inversion" in the China-US interest rate spread continued to narrow. Both the 10Y US Treasury nominal and real yields continued to decline, and inflation expectations edged lower. Offshore US dollar liquidity tightened marginally, while the domestic interbank funding environment was overall balanced with a slight easing bias, and the term spread (10Y-1Y) narrowed. Trading heat, volatility and liquidity: Market trading heat picked up slightly, and volatility across major indices all continued to rise. Trading heat in sectors such as media and banking was above the 80th percentile. Volatility in sectors such as communications and electronics was above the 80th percentile. Institutional research: Research heat was highest in sectors such as electronics, pharmaceuticals, non-ferrous metals, food & beverage, and communications, while research heat in sectors such as steel, pharmaceuticals, machinery, non-ferrous metals, and computers picked up on a week-on-week basis. Analyst forecasts: Full-A 2026/2027 net profit forecasts were simultaneously revised down. By industry, 2026/2027 net profit forecasts were revised up for consumer services, electronics, chemicals, computers, and textiles & apparel. By index, 2026/2027 net profit forecasts were revised up for the SSE 50, while those for the ChiNext Index, CSI 500, and CSI 300 were all revised down. By style, 2026/2027 net profit forecasts were revised up for mid/small-cap growth and mid-cap value, while those for large-cap growth and large/small-cap value were all revised down. Northbound activity picked up, with renewed net buying of A-shares Based on the top 10 active stocks, the buy-sell ratio of northbound flows rose in sectors such as power equipment & new energy, banking, and food & beverage, and fell in sectors such as building materials, communications, and machinery. Based on the universe of stocks with northbound holdings below 30 million shares: last week northbound flows mainly net bought sectors such as electronics, computers, and machinery, and only net sold sectors such as construction and home appliances. Overall: northbound flows likely mainly net bought sectors such as electronics, computers, pharmaceuticals, power equipment & new energy, and non-ferrous metals. Margin financing activity picked up slightly but remained at a low since late September 2024 Last week margin financing continued to net sell RMB57.046 billion. By industry, margin financing continued to net sell all types of sectors, among which electronics, communications, and power equipment & new energy were mainly net sold. The share of margin financing purchases rose in sectors such as construction, communications, and commerce & retail. By style, margin financing continued to net sell all style sectors. Dragon-Tiger List trading heat continued to decline Last week the total buy-sell value on the Dragon-Tiger List continued to decline, and its share of full-A turnover also fell somewhat. At the industry level, the Dragon-Tiger List buy-sell value share was relatively high and still rising in sectors such as home appliances, computers, and machinery. Active equity fund positions edged up, while equity ETFs continued to see large return inflows Based on the quadratic programming method, after excluding price change factors, last week active equity funds mainly increased positions in sectors such as communications, real estate, and banking, and mainly reduced positions in sectors such as machinery, defense, and computers. By style, the correlation of active equity funds with large/mid-cap growth rose, while correlation with small-cap growth and large/mid/small-cap value fell. Last week the scale of newly established equity funds rebounded, with both active and passive new establishment scales rising. Last week equity ETFs continued to see large net subscriptions, mainly institutional ETFs. Judging from the indices tracked by ETFs, ETFs tracking the CSI 300, ChiNext Index, and STAR 50 were mainly net subscribed. Breaking down equity ETFs by industry, equity ETFs continued to net buy all types of sectors, among which TMT, power equipment & new energy, and financials & real estate were mainly net bought. It is worth noting that, on the one hand, margin financing activity picked up slightly but continued to see large net selling, while northbound funds saw some return inflows; accordingly, active equity fund positions edged up, while equity ETFs continued to see large net subscriptions. On the other hand, last week the buy consensus between ETFs and northbound flows rose, while the buy consensus between margin financing and the Dragon-Tiger List fell. Overall, leverage funds represented by margin financing continued to see large net outflows, but with last Friday's rebound the maintenance guarantee ratio recovered somewhat; accordingly, equity ETFs remained the market's main supporting force, while northbound flows and active equity funds both saw some phased return inflows. The market may still face repeated trading fluctuations in the current phase, and going forward attention still needs to be paid to whether margin financing can gradually stabilize and return, as well as the sustainability of return inflows from other participants. Risk warning: Estimation errors.