With a 30% drop at the beginning of the year, a flash crash of micro-cap stocks and a heavy fall in quantitative funds, is it an opportunity or a trap after the fall?

Quantitative funds ushered in the "darkest moment". Since 2024, the A-share market has fallen into adjustment, and small and micro cap stocks have suffered a cliff-like decline, and related heavy funds have also suffered heavy losses, with the net value of nearly 13 small and medium-cap funds falling by more than 30% in just over a month.

For the decline of micro-cap stocks, Wanjia Fund told the "China Times" reporter on February 8 that from the perspective of market style, the change in policy has made large-cap blue-chip stocks led by central state-owned enterprises become the main line in the short term, and the blood-sucking effect of funds has led to a liquidity stampede and short-term panic selling in the small and medium-cap index;

Small and micro cap stocks have fallen sharply

The style of the A-share market has turned again, and the small-cap market, which has been soaring all the way, has encountered a sharp brake. As of the close of trading on February 8, the Wind micro-cap index has fallen by 40.09% this year, falling nearly 40% in more than a month, the CSI 1000 and CSI 2000 indexes, which represent the small and micro cap style, fell by 15.19% and 27.49% respectively during the year, while the Shanghai 50 index, which represents the blue-chip style of the large cap, rose 1.14% over the same period.

At the same time, a number of public funds with heavy positions in small and medium-cap stocks fell into a "quagmire" of losses. Wind data shows that according to the classification of investment styles, AC shares are calculated separately, and small-cap funds are "wiped out", with 68 small-cap funds all having negative returns during the year, and mid-cap funds also retreating greatly, with an average return of -13.61% for 563 mid-cap funds during the year, of which more than 540 products have negative returns, accounting for 97%.

It is worth noting that the net value of nearly 13 small and medium-cap funds has fallen by more than 30%, including Dacheng Dynamic Quantification, Nuoan Multi Strategy, Jinxin Quantitative Selection, Jinyuan Shun'an Quality Selection, Bohai Huijin Quantitative Growth, etc. It is not difficult to see that most of the serious losses during the year are quantitative funds.

"Micro-cap stocks are volatile and susceptible to market sentiment and flows, and tend to be the first to sell when the market falls. Yuan Shuai, executive director of the high-quality development promotion project of specialized, special and new enterprises, told the "China Times" reporter that since the beginning of this year, the phenomenon of micro-cap stocks falling sharply may be due to the combined effect of multiple factors such as short-term rotation of the stock market, snowball knock-in, and futures spot linkage.

Tens of billions of fund managers "fell off the altar"

Since the beginning of the year, under the sharp decline of small and micro cap stocks, many tens of billions of fund managers have not resisted the pressure, and their performance has encountered "Waterloo".

For example, the Zhonggeng small-cap value stocks managed by Qiu Dongrong, the latest size of the fund is 5.718 billion yuan, and the decline from the beginning of the year to February 8 is 15.85%, far underperforming the CSI 300 index in the same period.

Coincidentally, Ma Fang, the 10-billion-level fund manager of Guojin Fund, has annual returns of -26.59%, -26.77% and -9.55% respectively for his representative works Guojin Quantitative Multi-Factor, Guojin Quantitative Select, and Guojin Quantitative Multi-Strategy.

In addition, as of February 8, Qiao Liang, the "famous general" of Wanjia Fund, managed Wanjia Yuanzhen Quantitative Stock Selection and Wanjia Quantitative Selection, with annual returns of -22.71% and -20.89% respectively.

It is worth mentioning that the "investment myth" Miao Weibin's management of Jin Yuan Shun An Yuanqi was not spared, falling as much as 16.41% during the year, and setting the largest drawdown since its establishment; similarly, Zhou Boyang, another star fund manager who focuses on the strategy of micro-cap stocks, also suffered a "decline" in performance, and the Jin Yuan Shun An high-quality selection managed by Jin Yuan Shun An has plummeted by 31.53% since the beginning of the year.

Not only public funds, but also quantitative private equity has also encountered a "cold snap", and in the past month, many large quantitative companies have suffered heavy losses. According to the data of the private placement network, as of February 2, a number of quantitative private equity products such as Jiukun, Mingtun, Lingjun, Yanfu, and Wenbo have seen a drawdown of more than 20% during the year.

"Behind some of the micro-cap stock strategies is actually speculation and speculation, but there are also high-quality stocks that have been wrongly killed. A private equity fund person in Beijing told the "China Times" reporter that in 2023, public and private equity funds will collectively hold micro-cap stocks, resulting in the overvaluation of micro-cap stocks.

It has long-term allocation value

As of the close of trading on February 8, the Shanghai Composite Index rose 1.28% to 2865.90 points, and a number of CSI 2000 ETFs rose to the limit, and market funds gradually flowed to small and micro cap stocks.

Looking ahead, a number of public funds believe that the current medium and long-term investment value of A-shares has gradually emerged, and as the policy continues to encourage incremental funds to enter the market, the market may usher in a confidence recovery.

Li Zhan, chief economist of the research department of China Merchants Fund, said that the short-term policy is actively boosting confidence, and the market is expected to bottom out and stabilize, focusing on the opportunity for the over-falling rebound of large-cap growth stocks;

Wanjia Fund told the "China Times" reporter that in the long run, the market style dominated by small and medium-sized caps under the stock game has not changed substantially. Small- and mid-cap constituents are still likely to be the preferred sectors for investors due to their relatively small market capitalization, light institutional holdings, high flexibility, and excellent chip structure. After experiencing the market mistakes caused by the short-term plate rotation, it is now more cost-effective to allocate.

From a macro perspective, the agency believes that the current domestic economic fundamentals are in the early stage of weak recovery, with the strengthening of overseas Fed interest rate cut expectations, the resonance of domestic and foreign liquidity factors has improved; At the same time, it is currently in the trend of industrial structure transformation and long-term dominance of emerging industries in recent years, so the market of small-cap stocks has long-term allocation value.

Editor-in-charge: Shuai Kecong Editor-in-chief: Xia Shencha