This week has seen fluctuations in the market, with stock ETFs drawing significant inflows of capitalIn just two days, nearly 12 billion Yuan has flowed into these funds, including an impressive net inflow of over 9 billion Yuan on the 17th alone.

At the same time, there is a substantial amount of capital waiting to enter the marketAmong these, four major fund companies, namely E-Fonda, GF Fund Management, Bosera Asset Management, and Yinhua Fund, have received approval for their artificial intelligence ETFs focused on the Shanghai Stock Exchange’s Science and Technology Innovation Board, with market entry expected soon.

Close to 12 billion Yuan has flowed in

According to calculations by Choice, from December 16th to 17th, 825 stock ETFs in the market (excluding cross-border ETFs) experienced a net inflow of approximately 11.768 billion Yuan.

Looking at specifics, the ICBC CSI A500 ETF saw a net inflow of 1.782 billion Yuan over the same two days, while the HuaTai-PB CSI 300 ETF had a net inflow of 1.159 billion Yuan.

Interestingly, since the end of September, small and mid-cap companies have exhibited strong performance but have recently experienced significant corrections, which has drawn in considerable buying interest

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From the ETF perspective, the Southern CSI 500 ETF had a net inflow of 1.083 billion Yuan, while the Southern CSI 1000 ETF and HSBC CSI 1000 ETF attracted 670 million Yuan and 417 million Yuan respectively.

Dividend-themed ETFs have also seen a notable inflow of fundsSpecifically, from December 16th to 17th, the HuaTai-PB CSI Dividend Low Volatility ETF attracted 654 million Yuan, while the HuaTai-PB Shanghai Dividend ETF and the CMB Dividend Low Volatility ETF received net inflows of 350 million Yuan and 303 million Yuan, respectivelyE-Fonda's CSI Dividend ETF also contributed with a net inflow of 237 million Yuan.

More funds are on their way

From recent ETF issuance and approval trends, it appears more capital is poised to enter the market.

Current data from Choice reveals that eight ETF products related to the CSI A500 index are in the issuance process, including the PuYin AnSheng CSI A500 ETF and the Tibet Dongcai CSI A500 ETF.

In addition, numerous enhanced funds based on the CSI A500 index are also in the issuance stage, including funds by Galaxy Asset Management, CMB Fund, Shenwan Hongyuan, China Europe Fund, and Xingzheng Global

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The Fortune Fund’s enhanced fund is expected to launch soon.

Moreover, since December 9th, multiple funds related to the CSI A500 index have continued to be reported, with several fund houses submitting applications for enhanced index funds and various market participants showing increased interest.

On December 16th, the AI ETFs reported by E-Fonda, GF, Bosera, and Yinhua were officially approved, marking the first batch of such products from the Science and Technology Innovation Board, and market entry is anticipated shortly.

Looking forward, more long-term capital is expected to enter the market

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According to new pension policies, starting from December 15, 2024, individuals participating in the urban employee basic pension insurance or rural resident basic pension insurance within China will be able to join the individual pension system.

The new pension product catalog now includes equity index fund varieties, with the first batch incorporating 85 equity index funds, including 78 that track various broad-based indices and 7 focusing on dividend indices, such as the CSI 300 and A500 indices, along with enhanced index funds and ETF-linked products.

According to Yin Hao, the fund manager from Bosera Fund's Index and Quantitative Investment Department, the inclusion of broad-based index products in the individual pension investment product catalog is poised to significantly attract new waves of funds into the index fund space.

Institutions remain optimistic about equities

At this juncture, institutions maintain a positive outlook on the equity market's future.

Fuguo Fund points out that positive fundamental factors in China are gradually accumulating; however, the healing slope and sustainability demand further policy support

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The financial data for November reflects the impact of current policies, while also indicating that the demand for entity financing and economic indicators are showing signs of improvementContinuous attention is required towards policy efficacy and additional incremental policy implementation.

In terms of sector allocation, Fuguo Fund emphasizes three key lines of focus driven by profitability, interest rates, and policy: firstly, sectors benefitting from global tech innovation and domestic advancements; secondly, areas where policy accelerations are evident; and thirdly, dividend assets, with consistent profitability expectations in sectors like railways, telecommunications, and utilities.

Shen AiQian, the equity investment director at Ping An Fund, shares insights that improvement in economic data is set to uplift the profitability cycle, shifting equity market dynamics from being valuation-driven towards being profit-driven