Core Summary:
- The Shanghai Composite Index and the ChiNext index closed down by 0.8% and 2.7% respectively, with funds significantly shifting towards low-valuation, high-dividend China Securities Banking ETFs.
- Risk-averse sentiment drove substantial allocation increases across the full spectrum of fixed income assets, with Sci-tech bonds and short-term notes ETFs leading in single-day net inflows, highlighting a defensive market characteristic.
- Over the course of the year, the oil and gas energy sector has been the main theme, with S&P oil and gas-related ETFs leading the market with an annual gain of over 60%.
On Tuesday, China's A-share market exhibited a trend of rallying high then falling back. By the close, the Shanghai Composite Index fell by 0.8% and the ChiNext index dropped by 2.7%. In the market, previously popular sectors related to memory and photovoltaic new energy showed significant pullbacks, with over 4,300 stocks recording declines. Amid this increased market volatility, funds are swiftly converging towards more certain assets.
ETF fund flow data indicates a typical defensive pattern in the market on that day. The banking sector emerged as one of the few leading trends, with multiple ETFs linked to the China Securities Bank Index rising between 0.67% to 0.98%. In contrast, net inflows into fixed-income assets, such as Sci-tech and municipal bonds, increased significantly. Specifically, a certain Sci-tech bonds ETF recorded a single-day net inflow of 2.5 billion yuan, bringing the total single-day inflow in the full spectrum of fixed income assets to over 12 billion yuan, reflecting institutions' heightened emphasis on safety margins at the quarter's end.
From a prolonged perspective, excess returns from energy and oil & gas assets remain solid. So far this year, ETFs linked to the S&P Oil & Gas Index have gained over 60%, significantly outperforming other broad-based indices. Meanwhile, the China-South Korea Semiconductor ETF, with about a 34.61% gain, has become a core asset in the growth track. This short-term defensive and long-term energy-focused dual structure represents the core trajectory of current market fund flows.
