Wall Street Institutions Will Increase The Proportion Of A-Share Allocation, Putting Pressure On The Stock Market

In the past two days, I visited many Wall Street institutions in New York, including investment banks, hedge funds, public funds, etc. On the whole, although the ups and downs of A-shares last year deterred some institutions and partially reduced their investment in A-shares, A-shares have now fallen out of value and become more attractive to medium and long-term funds, many Wall Street institutions said, The proportion of A-share allocation will be increased through various channels. US stocks at historic highs relative to the index They believe that the potential return rate of A-shares will be higher in the next year. At the same time, several overseas investment institutions said that after a year's efforts by Chinese management, in June, A-share It is more likely to join MSCI Index. Once successfully joined, it is expected to bring hundreds of billions of dollars of new investment to A-share every year. In April this year, as MSCI Mingsheng again asked international investors for their opinions on whether to include A-shares in its international index, attention to this issue has increased at home and abroad. As an MSCI index with more than 10 trillion dollars of asset tracking, investors will adjust their investment portfolio accordingly with the changes in the constituent stocks of the index. Including the index will become an important step for China to attract foreign capital to support the financial market and improve the international status of A-shares.

Wall Street investment institutions mainly invest in A-shares through QFII. According to statistics, QFII has increased its A-share holdings for two consecutive quarters, reflecting the recognition of overseas investment institutions on the value of A-shares. Official data shows that QFII has opened new A-share accounts for 49 consecutive months. In March this year, the State Administration of Foreign Exchange launched a new QFII quota of 2.621 billion dollars. So far, 274 QFIIs have been approved, and a total of 80.951 billion dollars of investment quota has been issued. From January to March, the number of new accounts opened by QFII was 7, 18 and 10 respectively, and the number of new accounts opened in the fourth quarter of 2015 was 33. QFII has continuously opened A-share accounts, and the investment quota has increased significantly, reflecting the recognition of overseas funds on the current valuation of A-shares. In particular, in the trend of market bottoming out and recovery in the first quarter, QFII has significantly increased its holdings, which shows that the market expectations for the second quarter of 2016 and beyond are very optimistic. From the perspective of industry preference, regardless of the banking sector, machinery and equipment, food and beverage are among the top two industries in the market value of QFII shares for 17 consecutive quarters.

Mutual recognition of funds between Mainland China and Hong Kong was launched in July 2015, opening up new investment channels for overseas investors; In February 2016, the State Administration of Foreign Exchange introduced new regulations on QFII investment quota, exchange management Principal locking period And so on. In terms of investment quota, the upper limit of investment quota for a single QFII institution will be relaxed, and the unified upper limit of investment quota will no longer be set for a single institution; In terms of exchange management, there is no longer a requirement for the inward remittance period of QFII investment principal. Second, after the decline in the past ten months, A-shares have already possessed medium and long-term investment value. Now they are included in the MSCI index, which is favorable for entering the cost control of A-shares. Third, the Shenzhen Hong Kong Stock Connect policy, which is now accelerating, is expected to dispel MSCI's concerns and facilitate the inclusion of A-shares in emerging market indexes. Fourth, after A-shares were included in the MSCI index, the initial allocation ratio was only 5%, and this ratio will be gradually increased in the future, just like the addition of RMB on November 30 last year IMF Like SDR, A shares do not need to fully meet the conditions to join the emerging market index. In the long run, overseas funds will become an important factor influencing the liquidity of the domestic capital market and gradually change the investment philosophy of the A-share market.

Wall Street investment institutions believe that the potential return rate of A shares in the next year is higher than that of the US stocks whose index is at a historical high. They believe that China's economy will start to recover and will not decline significantly, and the risk of corporate debt default that the market fears will be released after the Chinese government implements debt equity swap and launches CDS (credit default swap contract). In terms of monetary policy, the pace of interest rate increase by the Federal Reserve has slowed down, the People's Bank of China will continue to ease, and the market liquidity will remain abundant. Most of them are optimistic about the trend of A-shares in the coming year. In the coming months, they will continue to increase their A-share holdings. In terms of investment methods, some investment institutions focusing on A-shares are quite different from mainland institutions. For example, they pay more attention to the research and analysis of individual stocks and less attention to short-term index fluctuations. Due to the limited number of researchers, they will not pay attention to many industries and individual stocks. For valuable individual stocks, they will closely follow and conduct in-depth research. Get involved when these stocks fall out of value, and sell them when the valuation bubble appears after the stock price rises. This is similar to the value investment method advocated by Buffett. If they buy a promising stock at a relatively cheap price, and then the stock price continues to fall, they will make up positions to reduce costs, rather than panic cutting meat. Therefore, their band is based on the stock price of individual stocks, rather than mechanically setting a certain holding time. In judging the general trend of A-shares, overseas institutions generally said that they had no advantages. They also asked me to introduce the methods of studying and judging the general trend of A-shares, hoping to grasp the general direction in the future.