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Hong Kong Stock Concept Tracking | Fund managers increase positions to catch up with benchmark weights. The Brokerage Sector may welcome a reassessment of its value (with related stocks included).

Zhitong Finance ·  May 15 07:43

Taking Banks as an example, if the allocation ratio of the Sector increases from 3.3% in the annual report to three scenarios of 5%, 7.5%, and 10%, it will respectively bring in additional funds of 50 billion yuan, 123.7 billion yuan, and 197.3 billion yuan.

On May 7, the China Securities Regulatory Commission issued the "Action Plan to Promote the High-Quality Development of Public Funds," clarifying the establishment of a floating management fee collection mechanism linked to fund performance and strengthening the constraining effect of performance benchmarks.

Specifically, for newly established actively managed equity funds, a floating management fee collection model based on performance benchmarks will be strongly promoted;

Fund companies are required to establish a comprehensive assessment system focused on fund investment returns, appropriately reducing the assessment weight of operational indicators such as scale ranking, revenue, and profit; urging fund companies to establish and improve a compensation management mechanism linked to fund investment returns.

The new public fund regulations require strengthening the constraining effect of performance benchmarks, and the convergence of public fund holdings with performance benchmarks should be the direction.

Currently, 57.5% of performance benchmarks for actively managed equity funds use the CSI 300 Index, and 12.2% use the CSI 800 Index, thus the industry allocation of actively managed equity benchmarks is largely influenced by the CSI 300 and CSI 800 indices.

According to the full holding data of the 2024 annual report, actively managed equity funds are underweight compared to performance benchmarks: Banks (-7.3%), Non-bank Financials (-6.6%), Utilities (-1.5%), Computers (-0.8%), Food & Beverage (-0.7%).

From the perspective of individual stocks, those with lower allocations are: Kweichow Moutai, Ping An Insurance, CM BANK, East Money Information, Industrial Bank, China Yangtze Power, and BYD.

From the perspective of the impact of adjusting positions, taking Banks as an example, if the allocation ratio for the banking sector increases from 3.3% in the annual report to 5%, 7.5%, and 10% respectively, it would bring in additional funds of 50 billion yuan, 123.7 billion yuan, and 197.3 billion yuan, respectively, which would account for 2.8%, 6.9%, and 11.1% of the free-floating market value of the banking sector.

Additionally, it has been learned that regulators may soon allow all products to change their performance comparison benchmarks once without convening a unitholder meeting, thereby transforming allocation from a simple static comparison with the CSI 300 Index into a dynamic concept.

Goldman Sachs trading desk statistics show that Banks are the industry with the lowest position ratio held by local public funds, but due to local fund managers increasing positions to catch up with benchmark weights, the industry's performance has significantly risen.

HTSC points out that looking ahead to the industry's future development, the Politburo meeting indicates a continued stability and active Capital Markets, the Central Huijin will further play a role similar to that of a "stabilizing fund", and supportive policies for Capital Markets are expected to continue to materialize, focusing on top Brokerages with strong balance sheet application capabilities and stable performance growth, and seizing structural opportunities related to mergers and acquisitions.

SWHY released a Research Report stating that the net income attributable to the parent company in the brokerage sector grew by 83% year-on-year and 19% quarter-on-quarter in the first quarter, with good performance in brokerage and proprietary trading; the retail brokerage business made significant progress, and investment banking Refinancing saw high year-on-year growth driving positive revenue growth; investment yields significantly improved, and the expansion of financing business combined with reduced funding costs drove growth in net interest income; under high prosperity, the profitability and valuation of the brokerage sector show expected differences, and with policy support for stability and regulatory determination on the securities industry landscape for the next five years and 2035, the brokerage sector is viewed favorably.

Relevant Hong Kong stocks in the Chinese brokerage sector:

China International Capital Corporation (03908), CITIC SEC (06030), Everbright (06178), CSC (06066), HOLLY FUTURES (03678), GF SEC (01776), etc.

The translation is provided by third-party software.


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