Glonghui 10/10 丨Since this year, A-shares have followed a structured market, and ETFs tracking the Shanghai and Shenzhen 300 Index have dropped nearly 3%.

Amid the decline, capital used equity ETFs to “buy more as it falls.” According to estimates, in the first nine months of this year, equity ETFs received a total of over 460 billion yuan in net purchases.

Judging from the specific flow of capital, broad-based ETFs are very popular. Among them, the Huaxia SSE Science and Technology Innovation Board 50 component ETF received a net subscription of 50.16 billion yuan, and the Huatai Berry Shanghai and Shenzhen 300 ETF received a net subscription of 47.933 billion yuan. At the same time, the net subscription value of the E-Fangda GEM ETF, the E-Fangda SSE 50-component ETF, the E-Fangda Shanghai and Shenzhen 300 ETF, the Fuguo China Securities Hong Kong Stock Connect Internet ETF, the Harvest Shanghai and Shenzhen 300 ETF, the Huaxia Shanghai and Shenzhen 300 ETF, and the Huaan GEM 50 ETF are all over 10 billion yuan.

With the continuous influx of capital, more and more “Big Mac” products are appearing in the market. On September 28, the Huatai Berry Shanghai and Shenzhen 300 ETF exceeded 120 billion yuan, making it the largest stock ETF on the market.

The Shanghai and Shenzhen 300 Index was first officially released on April 8, 2005. It consists of 300 of the largest and most representative A-shares with good liquidity. This leading enterprise has a large market capitalization and strong profitability. It is the “ballast stone” of the core assets of the Chinese economy. The Shanghai and Shenzhen 300 Index is often used to reflect the overall performance of securities of listed companies in the Shanghai and Shenzhen markets, and is also a performance comparison benchmark for many institutional equity products.

With 6% of the number of listed companies, the Shanghai and Shenzhen 300 Index contributed 52% of the total market value of A-shares, 80% of net profit, and 76% of dividends. The 300 constituent stocks accurately cover leading enterprises with good performance and strong profitability in the A-share market. These outstanding enterprises have a considerable position in the industry both domestically and internationally, and are representative of China's core competitiveness.

The constituent stocks of the Shanghai and Shenzhen 300 Index are adjusted regularly every year to achieve survival of the fittest among constituent stocks, and the distribution of the industry changes accordingly. Through a comparison of ten years of industry distribution, most industries in the Shanghai and Shenzhen 300 Index have undergone quite obvious changes. In the past, leading companies with high market capitalization in the financial real estate, petrochemical, steel, and coal industries were still on the list, but their share of weight dropped significantly, while new economic sectors such as consumption, power equipment, pharmaceuticals, biology, electronics, and computers also gradually emerged, and their share of weight increased significantly.

Observing the successive changes in constituent stocks, from “flying coal” to “being autonomous and controllable,” the Shanghai and Shenzhen 300 Index is like a history of China's economic development. It vividly and objectively records and comments on the Chinese economy over the past ten years. The changes in the Shanghai and Shenzhen 300 Index are in line with the country's economic development transformation direction.

Li Bei, a private equity witch, recently expressed her personal opinion clearly: the RMB and the Chinese stock market may enter a bull market.

Furthermore, in a recently published article, the investment value of the Shanghai and Shenzhen 300 was once again mentioned. Li Bei suggested that from the perspective of an inflection point in the small cycle of the economy, the Chinese economy has actually already entered the right side. From a medium- to long-term perspective, real estate has been cleared, local government risks already have plans to be mitigated, stocks maintained thereafter, and stabilized at a low level from an incremental perspective. The rehabilitation of urban villages provides short-term economic support. The global development of Chinese enterprises after increasing their competitiveness supports a further increase in the global share of Chinese enterprises and supports corporate profits to grow above GDP in the medium to long term. Furthermore, important institutional changes supporting A-shares have also taken place, which are conducive to the long-term performance of the market. The high surplus makes it possible for China to maintain low interest rates, has the courage to cut interest rates, and domestic interest rates have fallen to an all-time low. The valuation of the mainstream index, the Shanghai and Shenzhen 300, has also fallen to an all-time low. Currently, both domestic investors and overseas investors, the allocation ratio to Chinese stocks has reached an all-time low or close to a historic low. In the context of continuing high surpluses, the RMB is also being suppressed more by sentiment driven short-term capital flows. RMB assets are fueling, and they only owe Dongfeng, that is, confidence and risk appetite. However, the peak of the US dollar and the decline in interest rates on the US dollar may bring east wind. Considering that domestic corporate profits have been corrected since August, the static price-earnings ratio of the Shanghai and Shenzhen 300 is at a low point of 15% in the past five years. Valuation profits are at a double bottom. There's nothing to be afraid of; it's just being patient and leaving it up to time.

Goldman Sachs pointed out in its latest China stock strategy report that in markets other than Japan in the Asia-Pacific region, it continues to suggest an oversupply of Chinese stocks to bet on a rebound that may occur before the end of this year. Among them, it is expected that H-shares listed in Hong Kong will outperform A-shares because their valuations are more attractive and recent capital going south to Hong Kong Stock Connect indicates a possible rebound before the end of the year.

Goldman Sachs combined 30 macro and market factors to construct a “market rotation model” (market rotation model), and predicted the potential returns of the Hang Seng Index, State-owned Enterprises Index, and Hang Seng Technology Index for the fourth quarter to reach 5%, 6%, and 12%, respectively; the potential returns for the Science Innovation 50 Index, GEM Index, and Shanghai and Shenzhen 300 Index for the same period were 7%, 3%, and 3% respectively.