Following the historical peak of northward capital outflows in early March, the "mood" of foreign capital finally stabilized and turned to steady inflows at the end of March. Since April, with Sino-US bond spreads narrowing or even upside down, and the short-term depreciation of the renminbi against the dollar, A-shares have moved northward to net outflows again. So what is the potential outflow pressure of foreign capital this round? Will it cause significant disturbance to A shares? Structurally, what industries are worth paying attention to?
When the interest rate gap between China and the United States is narrowing and hanging upside downThere is a "net outflow" of foreign capital in both stocks and bonds.
Yields on 10-year Treasuries rose to their highest level in more than three years on Monday, with Chinese and US 10-year Treasury yields upside down for the first time since 2010. With reference to the history, after each round of reduction of the "comfort" of the interest rate gap between China and the United States, the RMB exchange rate and China's cross-border capital flows will be under periodic pressure, and aggravate the volatility of the domestic stock market. In particular, in the bond market, since February this year, foreign investors have reduced their holdings of Chinese bonds by 66.9 billion yuan and 98.2 billion yuan for two consecutive months, the biggest drop in a single month since the data became available, and almost synchronized with the level of interest rate spreads between China and the United States. However, for A-shares, the rapid outflow of 61.5 billion of foreign capital in the first three weeks of March was more related to the emotional side, and turned to a steady inflow of 22.9 billion at the end of the month, but after the holiday, interest rates on US debt rose rapidly and the spread between China and the United States was upside down, and northbound funds began to turn to continuous net outflows again.
The current round of Sino-US interest rate spread upside down may not be strong.There are different disturbances to stocks and bonds.
Although in the short term, the market expects the Fed contraction table to continue to push up long-end US bond yields, while the domestic economy is under greater downward pressure in the short term, it does not rule out the possibility of further upside-down spreads between China and the United States. However, with the landing of US shrinking boots and the appearance of downward pressure on the economy, US bond yields may enter a downward cycle at the end of the second quarter, while following the improvement of the domestic epidemic and stable growth policies, basically facing good expectations, China's treasury bond yields are expected to rebound.Therefore, the current round of Sino-US interest rate spread upside down sustained or not strong.
As for stocks and bonds, although the short-term net outflow of foreign capital is difficult to end, the pressure on the bond market is relatively limited, considering that foreign investors have little pricing power in the domestic bond market. From the perspective of A-share experience, considering that the northward capital trading volume accounts for more than 10%, foreign investment has a significant impact on the trend of A-shares, the risk of A-shares has not yet been fully released, and the market still needs to be patient during the bottoming stage. however, in the current RMB exchange rate remains stable as a whole, there is still room for wide currency, A-shares are also expected to "take the lead".
Structurally, more attention should be paid to it.The resultant force of foreign capital in the "outflow direction"
Compared with industries that used to pay more attention to the key layout of northward funds, the current market needs to be more cautious to avoid the resultant force of foreign capital in the "outflow direction". The five industries with the largest net sales of funds to the north are food and beverage, pharmaceutical biology, computer, non-bank finance and transportation, especially combined with the proportion of market value in circulation (foreign pricing power). The net outflow of a large amount of foreign capital to architectural decoration, food and beverage, trade and retail, medicine and basic chemical industry may cause a greater disturbance. However, it is worth noting that although the proportion of foreign capital in the power equipment and electronics industry has declined due to a large decline, foreign capital still maintains a "net inflow" trend, which may mean that it is optimistic about the medium-and long-term growth of high prosperity.
