Huijin expands the scope of ETF holdings to send a strong signal to stabilize the market
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The A-share market once again welcomed Huijin to increase its holdings. On February 6, Central Huijin Investment Co., Ltd. (hereinafter referred to as “Huijin”) announced that it fully recognized the current allocation value of the A-share market and had recently expanded the scope of holdings of exchange-traded open-end index funds (ETFs). We will continue to increase our efforts and expand our holdings, and resolutely maintain the smooth operation of the capital market.
Judging from the market reaction, Huijin’s announcement of increasing its holdings has undoubtedly significantly boosted market confidence. On February 6, the A-share market experienced a big rebound. The Shanghai Composite Index, Shenzhen Composite Component Index and ChiNext Index rose by 3.23%, 6.22% and 6.71% in a single day respectively. The market volume exceeded 900 billion yuan. The total market volume There were 3824 stocks rising.
“Huijin’s statement has undoubtedly greatly boosted market confidence and pushed the A-share market out of the ‘golden needle to find the bottom’ trend. Huijin’s decisive increase in holdings at the bottom has played a role in boosting market confidence and activating the capital market.” Yang Delong, chief economist of Qianhai Kaiyuan Fund, told reporters that in the current market position, investors should maintain confidence and patience, and not be pessimistic about the economic prospects, the stock market prospects, and China’s high-quality assets.
“What the market lacks is confidence.” Li Huiyong, general manager of the research department of Changjiang Pension Insurance Co., Ltd., told reporters that judging from the current various indicators, whether it is equity risk premium, historical valuation quintiles and matching with the economy , the current capital market has investment value. However, due to the extreme lack of confidence in the market, it fell into a negative cycle of “insufficient capital supply – market decline – further lack of confidence”. This time, Huijin clearly stated that it fully recognized the value of the current A-share market allocation, which gave investors clear expectations and greatly boosted market confidence.
Li Huiyong pointed out that the market expects more policies to completely break this negative cycle in the future, and incremental funds will continue to follow up, allowing the market to enter a virtuous cycle as soon as possible. In addition, fundamentally speaking, the stabilization and recovery of the stock market requires the support of fundamentals. In the future, we need to further observe the pace of economic recovery to inject upward momentum into the market.
A spokesman for the China Securities Regulatory Commission said that the current valuation level of the A-share market is at a historical low, and the medium and long-term investment value has been highlighted, which has been fully recognized by investment institutions including Central Huijin. The China Securities Regulatory Commission firmly supports Central Huijin to continue to increase the scale and intensity of its holdings and will create more convenient conditions and smoother channels for its market entry operations.
Central Huijin is a wholly state-owned company funded by the state and makes equity investments in key state-owned financial enterprises. Historically, Huijin’s holdings are mostly close to the market bottom, which can effectively guide medium and long-term value investment funds to continue entering the market. Guotai Junan Securities said that most of Huijin’s previous holding increases were near the market’s periodic bottom, which serves as a stabilizer in a volatile environment. This round of holdings also occurred at a node with low market valuations. It plays an important signaling role in the current market environment and is expected to drive the restoration of market confidence and the entry of incremental funds.
In fact, Huijin’s announcement on increasing its holdings is already the third since last year. On October 11 last year, Huijin announced that it had recently increased its holdings in A-shares of Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank in the secondary market and would continue to increase its holdings in the next six months. On October 23, Huijin announced again that it purchased exchange-traded open-end index funds (ETFs) on that day and would continue to increase its holdings in the future.
In addition to Huijin’s increase in holdings, policies to maintain the stability of the capital market have been intensively introduced in recent times, and joint efforts from all parties are also taking shape. The State Council executive meeting held on January 22 heard a report on the operation of the capital market and work considerations. This State Council meeting is the first time for the new government to specifically listen to reports on the operation of the capital market and make clear arrangements, which fully reflects the great significance of maintaining the stability of the capital market for the overall economic and social situation. Since then, the securities regulatory authorities have launched a set of policy “combinations”, covering all aspects of market concern such as margin trading and securities lending, stock pledges, combating fraudulent issuance and financial falsification, and promoting listed companies to enhance their investment value.
A spokesman for the China Securities Regulatory Commission said that it will continue to coordinate and guide various institutional investors such as public funds, private equity funds, securities companies, social security funds, insurance institutions, and annuity funds to enter the market with greater efforts, and encourage and support listed companies to increase repurchases and increase their holdings. Strengthen efforts to introduce more incremental funds into the A-share market and make every effort to maintain the stable operation of the market.
Industry insiders and institutions generally believe that the current A-share market valuation is at a historical bottom, and investors should not be overly pessimistic. From the perspective of market valuation level, Debon Securities Research shows that as of February 2, the overall PE (TTM) of A-shares was 14.91 times, ranking at the 29% since 2012; the GEM index PE (TTM) valuation was 23.45 times, which is at the 0% percentile since 2012. The current PB score of straight A is the lowest since 2012, and the ROE score is 5% since 2012. China Galaxy stated that after the ups and downs of 2023, the negative factors inside and outside the stock market have basically been digested. Considering that the current A-shares are at the bottom of valuations, 2024 is expected to usher in a resurgence of confidence amid various positive factors at home and abroad. Pick up and attract capital inflow.
In fact, since 2024, despite the continued market fluctuations, the trend of funds deploying A-shares through stock ETFs has been very obvious. According to data released by China Galaxy Securities Fund Research Center, in January 2024, the total net capital inflow of all stock ETF funds (including A-share ETFs and cross-border ETFs) reached 168.179 billion yuan, setting a single-month net capital inflow since August last year. new highs. Relevant data shows that the share of ETF products tracking the CSI 300 Index has grown most significantly.
CICC stated that recent policies to stabilize growth, stabilize markets, and stabilize expectations are being gradually introduced and implemented. Positive changes in policies will help resolve short-term liquidity risks and boost investor confidence. The market will still have the ability to continue to recover in the future. of kinetic energy. Although the market may still be volatile in the short term due to the long holiday before and after the Spring Festival, there is no need to be overly pessimistic about the mid-term performance of A shares.
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