People who have been up and down in A-shares for many years must have heard a saying: "Fear the market, the market is always right." ”
Since the beginning of this year, large funds have continued to buy A-shares through ETFs. As of April 30, 2024, the share of ETFs increased by 133.476 billion during the year, of which the share of ETFs tracking the CSI 300 Index alone increased by 105.469 billion, an increase of 97.68% from the beginning of the year.
That is to say, the big money to buy ETFs is basically going to CSI 300-related ETFs, and in only 4 months, the share of ETFs tracking CSI 300 has nearly doubled.
Coinciding with the great counteroffensive of Chinese assets, it is time to explore the charm of the CSI 300 and the market funds to rush to it.
01
China's assets counteroffensive
"Suddenly, like a night of spring breeze, thousands of trees and pear blossoms bloom." This poem should be the best portrayal of China's soaring assets.
It took only two weeks for Hong Kong stocks to recover all the losses since September last year, and led the global rally during the May Day holiday. Northbound funds bought 22.469 billion yuan of A-shares on April 26, a record high.
Why so suddenly? Why this time?
Cheapness is the last word, and it is one of the key factors. Despite a wave of "technical bull" rises, the Hang Seng Index PE (TTM) multiple is only 9.43 times, and the CSI 300 Index is 12.18 times (as of May 8), with a relatively sufficient margin of safety.
To put it mildly, the Hang Seng Index's lowest valuation of the year came on January 19, when the PE (TTM) was as low as 7.5x, and the CSI 300 Index valuation fell to 10.6x on February 2.
Hong Kong stocks and A-shares did usher in a wave of explosive rebound in February, and northbound funds bought 60.7 billion yuan of A-shares in the same period.
But in March, Hong Kong stocks and A shares entered a sideways shock mode, the CSI 300 Index rose 0.61% in the same period, the Hang Seng Index rose only 0.18%, and the northbound funds only bought 21.9 billion yuan in one month, but on April 26, foreign capital bought 22.4 billion yuan in a single day, indicating that there must be a new trading logic behind it.
Hong Kong stocks suddenly broke out in mid-April, and A-shares also went on the rise. What happened during the same period was that the long-strong U.S., Japanese and South Korean stocks all ended in April.
After a two-month rebound, the valuations of Hong Kong stocks and A-shares have recovered to a certain extent. However, on the whole, the current valuation of China's assets is still at a low level, and the marginal improvement of the economy and policy is obviously a more cost-effective choice.
Further, unlike the unwavering valuation repair market in February, this time it was overseas investment banks that took the lead in sounding the clarion call for China's asset counteroffensive.
On April 23, UBS took the lead in upgrading the ratings of A-shares and Hong Kong stocks to "overweight", and downgrading the ratings of South Korean stocks to "neutral".
On May 4, Goldman Sachs exclaimed, "The China deal is back!" ”； On the same day, JPMorgan Chase shouted that it would increase its position in Chinese stocks in May, patiently waiting for the economy to accelerate its recovery;
On 8 May, HSBC was firmly optimistic that Chinese equities could outperform Japanese equities in the future.
Without exception, the reports are all pointing to: optimistic about China's economic recovery!
On the one hand, the marginal recovery of China's economy may drive the recovery of China's stock market's earnings at the molecular end. On the other hand, Hong Kong A-shares are still at historically low valuations and have a relatively sufficient margin of safety, which is expected to resonate with earnings recovery at the same time.
02
The clarion call for core assets is sounding
It is an indisputable fact that foreign investors are optimistic about Chinese assets, so what are they buying with real money?
This round of foreign capital continues to favor big white horse stocks. At the industry level, northbound funds mainly increased their positions in non-ferrous metals, banks, power equipment, medicine and biology, chemicals, real estate and other sectors in April.
(Industries where northbound funds mainly increased their positions in April, source: Choice).
At the individual stock level, foreign investors are also concentrated in leading white horses such as CATL, China Merchants Bank, BOE A, Haier Smart Home, Chifeng Gold, and Ping An of China.
At the same time, ETFs, insurance funds and mutual funds are also important incremental funds for white horse stocks. Central Huijin continued to increase its holdings in ETFs tracking the CSI 300, driving a net inflow of more than 300 billion yuan into equity ETFs this year.
As one of the most anticipated long-term funds, insurance funds have gradually increased their allocation to the equity market since last year, and in the first quarter of this year, insurance funds as a whole added non-bank finance, electronics, medicine, food and beverage and other sectors.
In the second half of last year, the holdings of public funds had a tendency to sink in the market value, but in the first quarter of this year, fund managers refocused on core assets, and the individual stocks that increased their positions were basically concentrated in the core assets represented by the leaders of various industries.
From the perspective of core asset performance, after January 29, the Wind Micro Cap Index continued to underperform the CSI 300 Index.
Compared with the industry itself, the industry's leaders have achieved significant excess returns this year, and the CSI 300 has also begun to achieve excess returns again.
Nowadays, foreign capital, ETFs, insurance funds, public offerings and other funds have driven the market to further focus on core assets, and it is foreseeable that as foreign capital continues to enter the market with great fanfare, it is bound to resonate with domestic capital, and the clarion call for core assets has been sounded.
03
300 ETFs, all the core assets of A-shares
As the "vane" of A-share investment, the CSI 300 Index is one of the benchmark indices of China's stock market.
The 300 ETF (fund code: 159300) tracks the flagship A-share index "CSI 300".
As we all know, the CSI 300 Index covers 300 leading companies with large scale and good liquidity in Shanghai and Shenzhen, with a total market value of more than 51 trillion yuan. The CSI 300 Index accounts for 67% of the total market value of A-shares with less than 6% of the number of stocks, and it deserves to "wipe out" the hard-core assets of A-shares.
Index feature 1: favored by large funds
Nearly eighty percent of the share growth of ETFs this year was contributed by ETFs tracking the CSI 300, and the funds nearly doubled the share of related ETFs in just four months, from 107.97 billion at the beginning of the year to 213.439 billion at the end of April, an increase of 97.68%.
Index feature 2: The industry coverage is complete and balanced
From the perspective of industry distribution, the industries covered by the CSI 300 Index are mainly concentrated in banks (13.09%), food and beverage (11.49%), non-bank finance (9.17%), electronics (8.09%), power equipment (7.95%) and medicine and biology (6.41%), with a total weight of more than 50%.
It is worth mentioning that the constituent stocks of the CSI 300 change every six months, and the proportion of financial real estate, steel and other industries has decreased significantly in the past decade, while the proportion of emerging growth industries such as electronics, power equipment, and new energy has increased.
This is exactly in line with the trend of China's replacement of old and new drivers, reflecting the index's keeping pace with the times and representing new changes in China's economic development momentum.
Index feature 3: The blue-chip attribute of the large market is prominent
The CSI 300 Index focuses on the core assets of A-shares, with a total market capitalization of about 51.19 trillion yuan and an average market value of about 170.619 billion yuan.
According to the distribution of circulating market capitalization, the weight of more than 600 billion accounts for 4%; the weight of 300 billion to 600 billion accounts for 28%; The weight of 50 billion to 100 billion is 33.33%, and the constituent stocks as a whole show the characteristics of large market capitalization leaders.
The CSI 300 also has 31% of the weight distributed in the circulating market value of 10 billion to 50 billion companies, reflecting the characteristics of the CSI 300 with equal market capitalization and growth, ensuring the robustness of the index and a certain degree of aggressiveness.
Among them, the top 10 heavy stocks in the CSI 300 are all core assets, namely Kweichow Moutai, CATL, Ping An of China, China Merchants Bank, Midea Group, Wuliangye, Zijin Mining, Yangtze River Power, Industrial Bank, and Hengrui Pharmaceutical, accounting for 22.55% in total.
Undoubtedly, as a leading stock in the industry, the average earnings growth rate outperformed the industry to which it belongs. In the future, the core leaders are expected to further exert scale effects, and the long-term growth momentum may be more obvious.
Index feature 4: Relatively generous dividends
As an index that includes leading stocks in various industries, the dividend strength of the CSI 300 should not be underestimated, basically stable at more than 2% in the past ten years, and the dividend yield of the CSI 300 Index will reach 3.16% in 2023, with a total cash dividend of 1.2 trillion, accounting for 70% of all A-shares.
04
The economy has stabilized, and it is time to invest in 300 ETF (159300).
Since February, with the intensive introduction of a number of policies to stabilize the market and stabilize expectations, the effect of the current stable growth policy is gradually emerging.
China's GDP grew by 5.3% year-on-year in the first quarter, and the manufacturing PMI in April was 50.4, higher than the expected 50.3, pointing to the fact that China's nominal economy is expected to continue to improve.
Caixin China's services PMI recorded 52.5 in April, remaining in the expansion range for 16 consecutive months.
The latest tourism data on May Day also shows that domestic demand is gradually recovering. During the three-day May Day holiday in 2024, 295 million domestic tourists traveled, an increase of 28.2% over the same period in 2019 on a comparable basis; The domestic tourism revenue reached 166.89 billion yuan, an increase of 13.5% over the same period in 2019.
Historical data shows that in the early stage of economic stabilization, leading stocks have a good profit advantage, and when the economy recovers, it often ushers in a market where valuation is repaired first and earnings are repaired later.
Blue-chip companies represented by the CSI 300 Index (non-financial) have bottomed out in earnings since the second half of last year, and with the continuous recovery of corporate earnings, it is expected that large-cap value stocks such as CSI 300 are expected to significantly outperform CSI 1000 small-cap stocks in the second quarter.
As of April 19, the price-to-earnings ratio (TTM) of the CSI 300 Index was 11.74 times, which is at the 28.07% quantile since its listing. The price-to-book ratio is 1.26, which is in the 6.85% percentile of the last decade. Both are at a relatively low historical level, with more room for upside and a higher margin of safety in the future.
At present, the valuation of the CSI 300 is at a historical low, and its downside risk is limited in the context of a large number of major funds subscribing to CSI 300-related ETFs.
Against the backdrop of asset shortages, high-dividend and high-dividend indices have the strength to strengthen this year, and the underlying core assets in high dividends may provide additional upside flexibility. Among the constituent stocks of the CSI 300 Index, the total weight of pro-cyclical listed companies is close to 50%, so it can be said that the 300 ETF (159300) belongs to both offensive and defensive varieties.
At a time when foreign investors are strongly optimistic about China's economy, it is expected to recover significantly, which is expected to resonate with the help of funds to push up core assets, and paying attention to 300ETF (159300) at this time can be described as the old saying goes, "advance can be attacked, retreat can be defended".
The 300ETF (159300) is available from May 13 to May 24. The fee rate of 300ETF is also one of the lowest brackets in tracking the CSI 300 Index, with an annual management fee rate of 0.15% and a custody fee rate of 0.05%, totaling 0.2%, for investors, 300ETF (159300) has a significant cost advantage.
Standing at the current point in time, China's economy continues to release signs of recovery, and its core assets are expected to usher in a day of nirvana after three years of tempering. In other words, whether it is a short-term rebound or a long-term bullishness, 300ETF (159300) is one of the investment varieties worth researching and paying attention to.
Risk Warning:
The above views, opinions and ideas are based on current market conditions and are subject to change in the future. Past performance of the Index is not indicative of future performance and does not constitute a guarantee of investment income or any investment advice. Indices operate for a relatively short period of time and do not reflect all stages of market development. Funds are risky and should be invested with caution.