Source: Kevin strategy research. Authors: Liu Gang, Zhang Weihan, etc. This week, there are several changes in global liquidity worth noting: 1) According to the EPFR fund data we tracked, as of this Wed (Jun-12), overseas capital continued to outflow from A-shares and Hong Kong stocks, but the outflow scale slowed down compared to last week; 2) As for the mutual market access, northbound capital massively flowed out, while southbound capital accelerated inflow; 3) The stock, bond and currency markets globally all maintained inflow; 4) US stocks turned into outflow, while Japan and developed Europe continued to have outflow. Domestic liquidity-wise, overseas capital still continuously flows out of the China market but the scale has narrowed. As of this Wed (Jun-6 to Jun-12), active funds outflowed a total of USD 180 million from the A-share and Hong Kong stock markets, which slowed down from last week's outflow of USD 280 million. At the same time, passive funds also outflowed, which slowed down to USD 280 million from last week's outflow of USD 360 million. After the rapid repair in the early stage, the A-share and Hong Kong stock markets have gone through a correction since the end of May, and the Shanghai Composite Index has fallen to around 3,000 points, while the Hang Seng Index has even fallen below the key resistance level of 18,000 points, consistent with the recent weakness in liquidity. The market performance since the end of April also confirmed our judgment that this round of capital inflow is mainly dominated by trading and regional partially configured fund. As for the global liquidity, active foreign capital flowed out of Japanese stocks, while US stocks turned into inflow and inflow into India accelerated. As of this Wed (Jun-6 to Jun-12), this week the active foreign capital inflow into the Indian market accelerated, with an overall inflow of USD 540 million (compared to an inflow of USD 260 million last week); As for Japanese stocks, the active foreign capital continued to flow out this week, with a narrower scale compared to last week's outflow of USD 400 million (outflowing USD 140 million this week). Meanwhile, active foreign capital turned into outflow for US stocks, with an outflow scale of USD 67.53 million.
China market

Overseas capital: EPFR foreign capital continues to outflow, but with a reduced scale. As of this Wed (Jun-6 to Jun-12), A-share active foreign capital outflowed USD 81.89 million (compared to an outflow of USD 1.026 million last week), while passive fund outflow slowed to USD 54.23 million (compared to a net outflow of USD 220 million last week). At the same time, Hong Kong and ADR overseas funds of USD 320 million in total outflowed (compared to a net outflow of USD 320 million last week), of which active funds outflowed USD 93.24 million (compared to an outflow of USD 180 million last week), and passive funds outflowed significantly to USD 230 million. Mutual market access: Northbound capital massively flowed out, the food and beverage sector suffered the largest decline in holding value. This week (Jun-10 to Jun-14), northbound capital has net outflowed for 4 trading days in a row, with an overall outflow scale of CNY 21.87 billion, an average daily outflow of CNY 5.47 billion (compared to an average daily inflow of CNY 1.06 billion from the previous week). From the perspective of industry sectors, technology hardware became the key sector with an increase in holding value, while food and beverage and banking sectors suffered the most declines in holding value. As for individual stocks, this week the targeted holdings of Sungrow Power Supply, Contemporary Amperex Technology, and Shenzhen Mindray Bio-Medical Electronics increased the most, but those of Kweichow Moutai, Bank of Communications, and Wuliangye Yibin declined. Southbound capital continued to inflow, with the energy and raw materials sectors having the highest growth rates. This week (Jun-10 to Jun-14), a total of HKD 26.96 billion of southbound capital flowed in, with an average daily inflow of HKD 6.74 billion (compared to an average daily inflow of HKD 5.45 billion from the previous week). At the industry level, the energy/raw materials and pharmaceutical sectors' holding value increased, while the mainland banking and insurance sectors' holding value declined the most. As for individual stocks, southbound funds increased their holdings the most for China Mobile, Bank of China, and CNOOC, but decreased their holdings for Kuaishou, Hong Kong Exchange, and COSCO Ship Engy, among others.

The global market: The stock, bond, and currency markets were all inflowing. As of this Wed (Jun-12), the stock, bond, and currency markets globally all maintained inflow.

India continued to have inflow, and the energy and raw materials sectors had the highest growth rates. As of this Wed (Jun-6 to Jun-12), this week the active foreign capital inflow into the Indian market accelerated, with an overall inflow of USD 540 million (compared to an inflow of USD 260 million last week). As for Japanese stocks, the active foreign capital continued to flow out this week, with a narrower scale compared to last week's outflow of USD 400 million (outflowing USD 140 million this week). Meanwhile, active foreign capital turned into outflow for US stocks, with an outflow scale of USD 67.53 million.

Chinese market

• Overseas capital: EPFR foreign capital continues to outflow, but with a reduced scale.

As of this Wed (Jun-6 to Jun-12), A-share active foreign capital outflowed USD 81.89 million (compared to an outflow of USD 1.026 million last week), while passive fund outflow slowed to USD 54.23 million (compared to a net outflow of USD 220 million last week). At the same time, Hong Kong and ADR overseas funds of USD 320 million in total outflowed (compared to a net outflow of USD 320 million last week), of which active funds outflowed USD 93.24 million (compared to an outflow of USD 180 million last week), and passive funds outflowed significantly to USD 230 million.

• Mutual market access: Northbound capital massively flowed out, while southbound capital accelerated inflow. This week (Jun-10 to Jun-14), northbound capital has net outflowed for 4 trading days in a row, with an overall outflow scale of CNY 21.87 billion, while southbound capital had accelerated inflow.

From an industry perspective, technology hardware became the key sector with an increase in holding value, while food and beverage and banking sectors suffered the most declines in holding value. As for individual stocks, this week the targeted holdings of Sungrow Power Supply, Contemporary Amperex Technology, and Shenzhen Mindray Bio-Medical Electronics increased the most, but those of Kweichow Moutai, Bank of Communications, and Wuliangye Yibin declined.

Southbound capital continued to inflow, with the energy and raw materials sectors having the highest growth rates. This week (Jun-10 to Jun-14), a total of HKD 26.96 billion of southbound capital flowed in. As for individual stocks, southbound funds increased their holdings the most for China Mobile, Bank of China, and CNOOC, but decreased their holdings for Kuaishou, Hong Kong Exchange, and COSCO Ship Engy, among others.

The global market

Cross-market and assets: Outflow from US stocks, continued outflows from developed Europe and Japan, and inflows turning into emerging markets. In terms of active foreign investment, US stocks saw an outflow of $67.53 million this week (compared to an inflow of $180 million last week), developed Europe saw an outflow of $390 million (compared to an outflow of $1.51 billion last week), Japan's stock market continued to see an outflow of $140 million (compared to an outflow of $400 million last week), and emerging markets turned into an inflow of $360 million (compared to an outflow of $270 million last week). In terms of assets, global equities, bonds, and mmf continued to flow in.

Allocation ratio: As of April 30th, the active fund's allocation ratio to China is about 0.2% lower than the benchmark. Since 2022, global active funds have shifted from over-allocated to under-allocated with regard to China and India, while South Korea remains over-allocated and Japan's under-allocation has decreased slightly. Since January 2022, the allocation ratio for China has decreased the most (-0.2%), while the United Kingdom (+1.3%), France (+0.6%), and Japan (+0.3%) have seen the largest increases. Looking at the type of region, funds managed in Europe have been the main outflow; at the sector level, overseas funds are over-allocated in medical care, consumer, semiconductors and hardware, capital goods, while under-allocated in the internet, finance and real estate.

Editor/Jeffy