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Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?

Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?

Reporter: Wang Haimin Editor: Peng Shuiping

As expected, today's A-share market finally ushered in a good start to the Year of the Dragon, and the small and micro-cap stocks that fell the most before the holiday ushered in a strong rebound today, among which the CSI 2000 Index rose 4.37%, leading the market.

However, many investors found that their CSI 2000 ETF did not keep up with the benchmark index today. In early trading today, a number of CSI 2000 ETFs were once sharply discounted, and the difference between the rise and fall of some CSI 2000 ETFs and the CSI 2000 Index once exceeded 5 percentage points.

In this regard, the relevant person in charge of the wealth management line of a brokerage believes that the high probability is related to the many short-term sell-offs in the morning, and mainstream institutions should not do such short-term transactions. 

In addition, the reporter learned from a fund company that today the fund company had received a consultation from a brokerage why the CSI 2000 ETF could not be redeemed. Industry insiders predict that this may be because the relevant CSI 2000 ETF triggered the redemption cap today, "the fast action may be redeemed this morning, and the discounted money is earned".

A number of CSI 2000 ETFs showed large intraday discounts

Among the major A-share indexes today, the CSI 2000 Index rose 4.37%, ranking first among the major A-share indexes. However, the performance of the CSI 2000 ETF in the secondary market today is not so strong, and most of the CSI 2000 ETF have risen below the index.

Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?

Today's closing performance of each CSI 2000 ETF

Taking the largest Huatai Pineapple CSI 2000 ETF in the market as an example, the ETF and the CSI 2000 Index have a significant gap between the actual trend of the ETF and the CSI 2000 Index this morning, not only did not follow the index up, but there was a sharp dive shortly after the opening, and the gap between the ETF and the CSI 2000 Index in early trading once exceeded 5 percentage points. In addition, the ETF was discounted by nearly 3% at one point in early trading. 

At the same time, CUAM CSI 2000 ETF and GF CSI 2000 ETF also experienced similar deviations from the trend of the corresponding indices in early trading. As of today's noon close, the above-mentioned CSI 2000 ETFs have all seen discounts of more than 1%. 

After entering the midday session, the secondary market prices of several CSI 2000 ETFs, which had a deep discount in early trading, rebounded, resulting in a significant narrowing of the discount rate. For example, as of today's close, the discount rate of the Huatai Pineapple CSI 2000 ETF has narrowed to 0.45%. However, as of the close, most CSI 2000 ETFs have underperformed the CSI 2000 Index today. 

For today's many CSI 2000 ETF once had a significant discount, a brokerage metalworking analyst pointed out to reporters that a trading day before the Spring Festival (February 8) several CSI 2000 ETF rose too much, in the case of the index did not rise to the limit, many ETFs have risen to the limit, so there was a certain premium, but after today's opening, some CSI 2000 ETF fell sharply, which may mean that there are large funds to sell at this time. However, he said the nature of the funds is unclear.

It is worth noting that in the few trading days before the Spring Festival, the scale of many CSI 2000 ETFs increased to varying degrees. Choice data shows that in the few trading days before the Spring Festival, the scale of Huatai Pineapple CSI 2000 ETF grew rapidly, on February 2, its share was only about 500 million, and on February 8, the share increased by more than 400% to 8.466 billion. In fact, since the listing of Huatai Pineapple CSI 2000 ETF in September last year, its share size has remained in the range of 400 million ~ 500 million, and its performance has been relatively stable.

Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?

Recent changes in the size of Huatai Pineapple CSI 2000 ETF (source: Choice data)

Although the shares of several other CSI 2000 ETFs have also increased to varying degrees recently, the current size is significantly smaller than that of Huatai Pineapple CSI 2000 ETF. It is understood that the growth of ETF shares is due to a significant increase in subscriptions. The customer service of a fund company told reporters today that on the last trading day before the Spring Festival, it received calls from many institutions asking to subscribe for its CSI 2000 ETF.

The relevant person in charge of the wealth management line of a brokerage told reporters that judging from the sharp increase in the trading volume of some CSI 2000 ETFs on the trading day before the Spring Festival, it is expected that it is because some institutions have bought a large number of premiums in the market, which in turn has triggered a large increase in the number of subscriptions in the primary market. The large number of buying orders on February 8 should not only include large institutions, but also some retail investors and private equity followers.

He pointed out that excluding factors such as market makers, the sharp discount of some CSI 2000 ETFs today is likely to be due to the emergence of a lot of short-term sell-offs in early trading, resulting in significantly more sell-offs than buying, "This morning, some CSI 2000 ETFs have taken a sharp dive, which is expected to be related to the rapid shipment of some short-term trading orders involved in the eve of the Spring Festival, and mainstream institutions should not do such short-term transactions, and subscription funds are not likely to do such short-term transactions." ”

It is worth mentioning that the customer service of the above-mentioned fund company told reporters that they had received a request from a brokerage today why the CSI 2000 ETF could not be redeemed. Industry insiders expect that this may be related to the fact that today's related CSI 2000 ETF triggered the redemption cap, "the fast action may have been redeemed this morning and made discounted money". It is understood that when an ETF is discounted in the secondary market, there will be an arbitrage mechanism, that is, investors can buy it in the secondary market and then redeem it. However, once the redemption volume reaches the upper limit, such arbitrage cannot continue.

Differences between CSI 2000 ETFs

As of today's close, although most CSI 2000 ETFs are at a discount, there are also a few CSI 2000 ETFs that have experienced significant premiums. In the last few minutes of today's late trading, Ping An CSI 2000 Enhanced Strategy ETF rose in a straight line and closed close to the daily limit, but the trading volume at the end of the session was not significantly enlarged. Some industry insiders pointed out that such intraday changes need to be combined with the transaction amount, and if the turnover is not large, it will not be of much significance.

Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?

Judging from the overall situation of today's closing, the performance of more than 10 CSI 2000 ETFs of various types in the market varies greatly, and the gap between the largest increase and the smallest increase is nearly 9 percentage points.

In fact, although it is also an ETF benchmarked against the CSI 2000 Index, there will still be certain differences in the related products of various fund companies. These differences can lead to differences in returns between ETFs benchmarked against the same index. 

For example, in terms of scale, there is a big gap between the CSI 2000 index ETFs. The person in charge of the wealth management line of the above-mentioned brokerage said that if institutions want to participate, they will refer to the liquidity of ETFs, and Huatai Barry CSI 2000 ETF was the most liquid among the CSI 2000. According to Choice statistics, before February this year, the share size of Huatai Pineapple CSI 2000 ETF was significantly larger than that of several other similar ETFs. 

In addition, as a passive index fund, the main goal of an ETF is to track the trend of the underlying index, but there are as many as 2,000 constituent stocks such as the CSI 2000 Index, and some stocks are illiquid, so the relevant ETF cannot track the index in a fully replicated way. At this time, the fund company will adopt the method of sampling and replication, usually selecting some of the constituent stocks from the index constituent stocks, so that the income of the portfolio is as close to the index performance as possible. The specific approach of each fund company may be different.

Judging from the 2023 quarterly report, as of the end of last year, the top 10 constituent stocks of each CSI 2000 ETF have a low degree of overlap, and the differences are more obvious. Correspondingly, as of the close of trading on February 8, the net value performance of various CSI 2000 ETFs in the market since 2024 has been quite different. According to the reporter's statistics, the gap between the net value growth rate of the CSI 2000 ETF this year has exceeded 4 percentage points.

Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?
Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?
Small and micro caps ushered in a good start to the Year of the Dragon, but many CSI 2000 ETFs significantly underperformed the index, what happened?

The top 10 constituents of some CSI 2000 ETFs at the end of 2023

National Business Daily

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