From the fourth quarter of last year to the first quarter of this year, China-related funds issued overseas have been actively repositioning and exchanging shares. China’s animal husbandry and planting industries are favored, the real estate industry is also showing a recovery trend, and the biotechnology industry has been sold by funds.
With the recent stabilization of the epidemic situation, some foreign institutions, in combination with the valuation of A-shares, believe that the current allocation time for A-shares has emerged.
Livestock, planting, real estate recovery
According to the research data of Copley Fund, a global fund research institution, as of the end of the first quarter, overseas China funds (the benchmark for the MSCI China Index), overseas China A-share funds (the benchmark for the MSCI China A-share index), overseas Greater China funds (the investment area) Funds in Greater China), the total size of the three categories is 153 billion US dollars, or about 1,012 billion yuan.
The data shows that overseas Chinese funds have the most obvious increase in positions in the livestock and planting industries. The average fund asset ratio of the animal husbandry industry is 0.97%, the highest level in history. Among the 129 actively managed overseas Chinese funds, 45.74% of the products are deployed in the animal husbandry industry. Compared with the MSCI China Index, 37.21% of the fund allocation ratio exceeds the index and is in a state of over allocation.
As of the first quarter of this year, actively managed overseas Chinese funds have increased their positions in animal husbandry and planting the most obvious of all industries. Judging from the proportion of funds that have deployed this industry, this value has increased by 9.3 percentage points in 6 months; the proportion of funds with overweight allocation has increased by 7.75 percentage points.
In terms of individual stocks, Yili is the most popular among overseas Chinese funds, with 24.8% of the funds holding this stock, with an average fund asset ratio of 0.6%, exceeding the reference benchmark; Tongwei and Muyuan are also held by more funds, but Compared with Yili shares, there is a large distance between the number of shares.
During this period, many overseas Chinese funds have opened new positions in livestock and plantation stocks, such as the “Mingji China Dividend Fund” under the Chinese investment expert Mingji International.
Looking at the style of funds, Copley Funds Research said all but value funds have increased their exposure to the sector.
Another trend worthy of attention is that the allocation of overseas Chinese funds to the real estate sector is picking up. Although overseas Chinese funds’ allocation to real estate remains low, there are some signs of improvement.
According to the data of Copley Fund Research, according to the proportion of funds that have deployed this industry, in the past 6 months, it has increased by 3.9 percentage points. The industry’s average fund asset ratio also rose by 0.45 percentage points. Copley Fund Research believes that this indicates a marginal improvement in the allocation of overseas Chinese funds to the real estate industry. However, over a long period of time, the allocation of overseas Chinese funds to the real estate industry is still at a historically low level. Not only that, in terms of the average fund asset ratio, the allocation of overseas Chinese funds to the real estate industry is still lower than the reference MSCI China Index.
Although the overall allocation is still low, the funds of well-known Chinese investors such as First State Yingxin and Fidelity have a high allocation to the real estate industry, and most of them are allocated by value funds.
In terms of individual stocks within the industry, China Overseas Development and Longfor Group have attracted more funds, and Poly Development has been established by many funds.
Biotechnology gets cold
In contrast to the above-mentioned Masukura behavior, overseas China A-share funds have significantly reduced their holdings in the biotechnology industry. The proportion of fund assets of overseas China A-share funds in the biotech industry dropped from 4% in July 2020 to 1.14%, which is underweight compared with the MSCI China A-share index. In the medical and health category, the biotechnology sub-industry has also fallen from the sub-industry most favored by overseas Chinese A-share funds to the fourth place, behind sub-industries such as biopharmaceuticals.
Among overseas Chinese A-share funds, as of the end of the first quarter of 2022, in the past six months, the proportion of funds in this sub-sector decreased by 4.1 percentage points, and the proportion of average fund assets decreased by 0.35 percentage points.
In terms of individual stocks within the industry, Changchun Hi-Tech, Kangtai Biotechnology, and WuXi Biotechnology are the most popular stocks. Copley Fund research pointed out that, except for Changchun High-tech, the fund’s interest in biotechnology is relatively weak.
Foreign institutions: the time for A-share allocation has emerged
Because the valuation is attractive enough, some foreign investors believe that the allocation value of A shares has already been reflected.
Jiang Zhenghao, equity investment manager of Baring China, believes that the allocation value of A-shares has already been reflected and is waiting for a turning point. Jiang Zhenghao said that in terms of the industry, due to concerns about rising cost inflation, Barings is cautious about some home appliance companies; given the high uncertainty of growth prospects, the biopharmaceutical industry is prudent. Meanwhile, Barings is exploring investment opportunities related to raw materials in the context of specific commodity macro support. “Our overall investment strategy has not undergone major changes. We have a positive view of the medium and long-term prospects of Chinese companies, and continue to be optimistic about investment themes with structural growth opportunities in the 14th Five-Year Plan, including consumption upgrades, technological innovation, and green energy development. “
Overseas asset management institutions such as Xinjiapo APS also believe that the attitude of foreign capital towards Chinese assets may further improve. The reporter learned that some Chinese traders of overseas pension funds and sovereign funds have received additional investment from clients. A trader who focuses on China’s growth companies said, “Despite the poor performance of Chinese stocks in 2021, our clients are increasing their funds. We are growth-style investors, focusing on growth industries including TMT. Growth. It’s always expensive, and you have to wait a long time, sometimes three or four years, to get the opportunity to buy the best companies. Now the opportunity is here. Because the investment horizon is long enough, we don’t worry about market volatility.” The trader’s client Including top-ranked sovereign funds overseas.
Foreign institutions, including Goldman Sachs, believe that the evolution of the epidemic is still one of the focuses of overseas institutions’ deployment in China.
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