Compared to the Hong Kong stock market next door, A-shares have been more cautious recently, and overall they have risen amid hesitation. On Monday, the Shanghai Index hit a new high during the year, closing at 3,171 points. The Shanghai and Shenzhen markets continued to sell for three consecutive days, yet they still haven't broken the trillion dollar mark.

Now, A-shares are once again close to the highest point of 3219.04 on August 28 last year, a huge negative line. The pressure on this position cannot be ignored, and too many brave chips have been accumulated.

At this point, the market seems to be at the crossroads of whether it continues to rise or pullback.

Today, Hong Kong's A-shares fell again. Today, the three major A-share indices fell collectively. More than 4,000 individual stocks fell, and the turnover shrank sharply by 19.2 billion yuan. Hong Kong stocks fell even deeper. The Hang Seng Technology Index fell 3.74%, and the Hang Seng Index and China Index both fell more than 2%.

“The pendulum stays in the middle for a very short time and always swings towards or away from the end of the arc.” Howard Max, founder of Oak Capital, wrote this.

Can the pendulum cross the shadow of 828 this time?

1

Foreign investors frantically bought Chinese assets last week

Actually, it is normal for the market to choose a pullback at this time. Since the market low on February 6, the Shanghai Index has risen 17% cumulatively, while the Shenzhen Index and the GEM Index have both risen by more than 20%. Hong Kong stocks are stronger, and the Hang Seng Technology Index has accumulated a cumulative increase of nearly 40% since January.

To put it bluntly, the market has rotated once in the technology sector and in the direction of the cycle; everything that should rise has gone up. What should be the next direction?

The real estate sector, which is expected to be the strongest on Monday, exiting a sharp rise in volume, shows that the market “buys expectations and sells realistically”. After the implementation of the real estate policy, capital chose to leave the market and observe. How many real benefits can the three-reduction policy+strongest inventory removal policy bring to real estate? How much demand to buy a home will be stimulated?

Once bitten by a snake, I was afraid of well ropes for ten years. The wave of “strong expectations, weak reality” in 2023 taught everyone a valuable lesson.

Needless to say, the new property market policy is a real benefit for the industry. As soon as the new deal came out last Friday, foreign investors bought A-shares on a bulldozer.

Beijing Capital made a net purchase of 13.956 billion yuan of A-shares last Friday, the highest level since a record day in late April.

Last week, China recorded the largest capital inflow among emerging market countries, reaching US$488 million, of which US$289.6 million went to the iShares MSCI China ETF.

(The content of this article is a list of objective data and information and does not constitute any investment advice)

According to Goldman Sachs Group's brokerage department data, hedge funds made net purchases of stocks in various regions of the world last week, and net purchases of Chinese stocks for the fourth consecutive week.

Brendan McKenna (Brendan McKenna), an emerging markets foreign exchange strategist at Wells Fargo Bank, said that the reason people buy Chinese stocks with large amounts of money every week is because people are increasingly optimistic that the Chinese government will take more measures to support the economy.

Goldman Sachs once again showed the characteristics of a “small singer” this Monday, raising the Shanghai and Shenzhen 300 target to 4,100 points in a high-profile manner, and maintaining the A-share “gain” rating.

According to the Goldman Sachs report, the MSCI China Index has rebounded 31% from its low level in late January, and has risen 19% in the past month, outperforming most developed and emerging markets. The main factors driving the upward trend include economic resilience, and macroeconomic policy support in the property market and capital market. Whether the subsequent upward momentum of the mainland stock market continues depends on policy implementation and Sino-US relations.

2

Capital to sell the Shanghai and Shenzhen 300 ETF and buy the A50 ETF?

Yesterday, “Epic Empty Staged Again!” The article also mentions:“In recent years, the concept of indexed investment has continued to spread, and more and more investors are choosing to use ETFs as investment tools with low rates, high liquidity, and low threshold to participate in market investments.”

Therefore, changes in ETF funds have become one of the indicators worth paying attention to in investment.

Yesterday's article also mentioned that the Shanghai and Shenzhen 300-related ETFs were the most “gold sucker” this year. As of May 17, the net inflow had exceeded 253.1 billion yuan.

However, when the market is at a new crossroads, did ETF funds last week actually show signs of selling off the Shanghai and Shenzhen 300 ETF?

Wind data shows that last week, ETFs tracking the China Securities A50 Index were favored by capital. Morgan Fund's China Securities A50 ETF Index Fund, Dacheng Fund's China Securities A50 ETF Fund, and Huatai Berry Fund's China Securities A50 ETF had inflows of 550 million yuan, 465 million yuan, and 442 million yuan respectively.

Huitianfu Fund MSCI China A50 ETF, E-Fangda Fund China A50 ETF, and Wells Fargo Fund China A50 ETF had inflows of 327 million yuan, 302 million yuan, and 278 million yuan respectively last week.

At the same time, the capital consistently sold off the Shanghai and Shenzhen 300 ETF, the Shanghai Stock Exchange 50 ETF, and related Hong Kong stock ETFs. Huatai Berry Fund's Shanghai and Shenzhen 300 ETF, Harvest Fund's Shanghai and Shenzhen 300 ETF, and eFangda, the Shanghai and Shenzhen 300 ETF, had outflows of 2,917 billion yuan, 1,165 million yuan, and 826 million yuan respectively.

The Huaxia Fund SSE 50 ETF and Guangfa Fund SSE 50 ETF Index had outflows of 2,064 billion yuan and 441 million yuan respectively last week.

3

How is the Shanghai and Shenzhen 300 different from the A50?

Historical experience shows that in the early stages of economic stabilization, leading stocks have a good profit advantage. When the economy recovers, they often face a market where valuation is repaired first and profit is repaired later.

Zhang Xia, chief strategy analyst at China Merchants Securities, also said recently that China's real estate market, local government financing, etc. are stabilizing, and the volatility of the Chinese economy has declined markedly, and it has entered high-quality growth. Under these circumstances, high-yield assets are scarce in the entire market and society. The high-quality weight index represented by the Shanghai and Shenzhen 300 or the China Securities A50 is expected to gain momentum and rise to a round of bullish momentum in the future.

Since it is also a representative index of core assets, the capital sold the Shanghai and Shenzhen 300 and Shanghai Stock Exchange 50 last week and switched to buying the China Securities A50. What is the intention behind it?

According to Shenwan's Tier 1 industry, the Shanghai Stock Exchange 50 and the Shanghai and Shenzhen 300 Index focus more on traditional large financial and consumer industries, while the share of the new economy in the China Securities A50 Index is higher, and the distribution of industries is more balanced.

The constituent stocks of the A50 Index cover all 30 China Securities Tier 2 industries, involving a total of 50 China Securities Tier 3 industries. Compared with other broad-based indices, the A50 industry distribution is more comprehensive and better reflects the Chinese economy. It can avoid excessive impact on the overall index due to excessive rise and fall in a single industry.

From a profit perspective, the profit expectations of the China Securities A50 Index for 2025 and 2026 are better than the Shanghai Stock Exchange 50 and the Shanghai and Shenzhen 300. According to iFind data, in 2025, the profit forecast for the China Securities A50 is a 13.82% year-on-year increase, while the Shanghai Securities 50 and Shanghai and Shenzhen 300 are only 6.87% and 9.72%.

Seen in this way, compared to the Shanghai Stock Exchange 50 and the Shanghai and Shenzhen 300, the China Securities A50 industry distribution is not only more balanced, but also more representative of new productivity, and profitability is also relatively advantageous.

Would this be a reason to invest in the A50 ETF last week?

We will never be able to accurately predict the full trajectory of the “pendulum” of the market. We can only try to analyze the telltale signs by observing the latest market conditions and try to find vague and relatively accurate ones. If you believe the puppy will eventually return to its owner.