A-shares: Fresh Capital Incoming.
China Securities A Series ETF Family Welcomes New Member.
From product submission to approval, it took only one day for the first batch of China Securities A500 ETFs reported by 10 public fund companies to be urgently approved.
First Batch of China Securities A500 ETFs Concentrated for Approval
As of September 7th, companies such as Harvest Fund, J.P. Morgan Asset Management, and JingShun Great Wall Fund, which were among the first batch of approved products, will officially start sales on the 10th (Tuesday). Industry insiders predict that as an important broad-based ETF in the market, the China Securities A500 Index has higher coverage and stronger representativeness of A-shares, and may provide a new benchmark for investing in China's economy and core A-share assets.
It is reported that the products of Harvest, JingShun Great Wall, Southern, Guotai, and Yee Hua Fund companies are planned to be listed on the Shenzhen Stock Exchange, while the products of J.P. Morgan Asset Management, Fullgoal, Huatai-PineBridge, China Merchants, and Taikang Fund companies are planned to be listed on the Shanghai Stock Exchange.
According to the introduction by China Securities Index Company earlier, to further enrich market representation tools and investment targets, the China Securities A500 Index will be released on September 23rd. The index adopts an industry-balanced sampling method, selecting 500 securities with larger market value from various industries as index samples. The index samples take into account both market value representativeness and industry balance, reflecting the overall performance of securities of representative listed companies in various industries. In addition, while the China Securities A500 Index has good representativeness, it also includes more leading companies in emerging fields. Data provided by the China Securities Index Company shows that the combined weight of the industrial, information technology, communication services, and healthcare industries is about 50%, higher than comparable broad-based indices. The latest sample covers all 35 China Securities secondary industries and 92 tertiary industries. As of the end of July 2024, the total market value of the index samples is about 40 trillion yuan, accounting for more than half of the total market value of A-shares, making it a new generation of broad-based index with broader coverage.
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China Securities A500 ETF is Expected to Bring Fresh Capital to the Market
Looking at historical performance, the China Securities A500 Index has commendable results. Data shows that as of June 2024, 76.6% of the sample net asset return on equity or revenue growth rate of the China Securities A500 Index is in the top 50% of the same industry. At the same time, the excellent fundamentals of the constituent stocks have also driven the long-term performance of the index. As of August 29, 2024, the cumulative increase of the China Securities A500 Index since the base date (December 31, 2004) has reached 279.58%, while the performance of the Shanghai 50, CSI 300, and China Securities 800 indices during the same period is 174.76%, 226.47%, and 248.08% respectively. Compared, the long-term running ability of the China Securities A500 Index may be more excellent.
With the support of multiple rounds of stable growth policies in the early stage, recently, the improvement of some economic data has continued to inject confidence into the market. Regarding the future direction of the market, Tan Hongxiang, Deputy Director of the Index Investment Department of Huatai-PineBridge Fund, analyzed that on the one hand, the global liquidity improvement represented by the Federal Reserve's interest rate cut is expected to drive the rise of risk appetite, bringing incremental funds to the core assets that have been relatively under-allocated in the past two years; on the other hand, the new quality productivity main line formed by the implementation and effectiveness of supply-side policies may become the new "reservoir" for carrying liquidity, giving growth assets greater marginal flexibility.
Based on the above analysis, Tan Hongxiang believes that by allocating large-cap blue chips and leading segments of the industry, the overall grasp of the market's expected gradient improvement and the valuation repair opportunity brought by the low-level rebound of risk appetite may be the current better choice.Jingshun Great Wall Fund believes that the launch of the CSI A500 Index is timely. The introduction of the CSI A500 Index and the listing of related ETF products will bring new vitality to the A-share market and are expected to offer investors products that allow for a more balanced allocation of the market.
Specifically, first of all, from the perspectives of valuation, risk premium, and trading activity, the A-shares are currently at a historical bottom area. Compared with the stock indices of major overseas markets, the valuation advantage of A-shares is very prominent. With the recent increase in global stock market volatility and the stabilization of the RMB exchange rate, the "multiple" value of A-shares is beginning to attract more capital.
Secondly, although the economy is currently going through the painful period of transformation, some indicators show that China's economy is at the bottom area and has structural resilience. Industrial enterprise inventories have bottomed out, and CPI and PPI are gently recovering, with some listed companies with global competitiveness having already started the corporate profit recovery cycle.
Furthermore, considering that the Federal Reserve's interest rate cut cycle is expected to begin in the second half of the year, the global risk appetite is expected to improve, and the marginal improvement in overseas liquidity is expected. Due to the prudent fiscal policy in the first half of the year, there is a significant policy space for fiscal efforts in the second half. Jingshun Great Wall Fund believes that currently, investors should remain optimistic about the A-share market.
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