In 2019, A Shares Increased To A New Starting Point For Foreign Capital Raising.

A typical characteristic of A share market since 2019 is the continuous inflow of foreign capital.

Data show that the total net inflow of north capital in 2019 was 351 billion 743 million yuan, a record high. At the same time, since the opening of Shanghai and Hong Kong and Shenzhen and Hong Kong, the total net inflow of capital has reached 993 billion 477 million yuan.

Standing on the point of breaking the trillion mark, and at the same time, it is also a new starting point for 2020. What kind of scenario will foreign capital be able to deduce in the A share market?

In fact, many institutions have put forward the idea that foreign capital will flow into A shares for a long time. As the capital market reform continues to deepen in the new year and the policy of opening to the outside world keeps increasing, there is still room for foreign capital to increase A shares.

"Foreign capital accelerates into A shares. On the one hand, it shows that A shares are valuation depressions in global capital markets. Foreign capital gains from US stocks, and flows from overseas markets to the bottom of A share market. On the other hand, it also shows that the demand for foreign capital for A shares has been increasing, because the proportion of foreign capital allocated to A shares is too low. Now foreign capital is accelerating the allocation of A shares, and foreign capital will continue to increase A share allocation in the next 10 years, and the mode of buying and buying will not change. Yang Delong, chief economist of Qianhai open source fund, told the twenty-first Century economic news reporter.

Holdings of banks, home appliances, electronics

Wind data show that as of December 30, 2019, the top five stocks of Shanghai stock holdings were the Founder Securities (601901.SH), the Agricultural Bank (601288.SH), the industrial and Commercial Bank of China (601398.SH), the Yangtze River Power (600900.SH) and the China Merchants Bank (600036.SH), with a total stock exceeding 1 billion shares. Among them, the largest stake in Fangzheng securities is 1 billion 463 million shares, accounting for 17.77% of A shares.

Shenzhen stock exchange data show that as of December 30, 2019, the top five stocks with the highest number of holdings were Ping An Bank (000001.SZ), BOE A (000725.SZ), Focus Media (002027.SZ), the United States Group (000333.SZ) and GREE electric (000651.SZ), with the exception of GREE, the number of 4 stocks held above 1 billion shares. Among them, Ping Ping bank is the 1 billion 512 million largest share holding company.

On the whole, Ping An Bank has become the largest number of stock holdings through Shanghai Stock Exchange and Shenzhen Stock Exchange, followed by Founder Securities and Agricultural Bank.

From the industry point of view, Choice data show that in 2019, the top five industries in the north capital increase sector were banks, home appliances, electronic components, pharmaceutical manufacturing and real estate. The market capitalization value of one year was about 52 billion 453 million yuan, 45 billion 64 million yuan, 27 billion 694 million yuan, 25 billion 374 million yuan and 24 billion 152 million yuan respectively.

Compared with 2018 data, northbound funds showed strong concern for growth and emerging industries.

"Investment in 2019 also showed some characteristics, such as some of the more investment style in the past one or two years is not sought after, in 2019, the overall market in addition to the first quarter of the three quarter of the performance is relatively flat, the market has very large structural differences. The preference of foreign capital to high quality companies with higher profits also has a certain preference for the market. Beijing, a large public fund investment director said.

"On the global scale, China's economic growth rate is still high, and it is also the highest in major economies. Our economic transformation will release more reform dividends and will lead to the growth of a great number of companies. Foreign capital is more clearly seen in this respect than domestic capital, so they are determined to allocate high-quality stocks. Yang Delong believes that "foreign capital inflows are all good quality stocks without exception. Foreign investment has had decades of investment experience in overseas markets, so their recognition of value is even higher. They are more willing to configure high-quality stocks and do well in the company's stock market."

Continuous layout is available.

In fact, foreign investment has brought a significant impact on the A share market in 2019, not only reflected in the changes in the style of market investment, but also in the transformation of investment structure.

"The increase in foreign investment has narrowed the distance between overseas investors and the domestic market, and has also brought improvements to domestic investment institutions, including investment decisions and so on." A public fund in Southern China said.

As for the current situation, 2020 will also be a year of continuous layout of foreign capital. With the acceleration of the internationalization of the domestic capital market, the policy of opening to the outside world has been overweight. MSCI, FTSE Russell, S & P and other international indexes have expanded the A shares, and the inflow of foreign capital will continue.

For example, former FTSE Russell said it would release the preliminary results of the semi annual review of the FTSE Russell global stock index series in February 21, 2020. The review will adjust part of the index in the global index series, and also increase the A share factor to 25%, and complete the third batches of the first phase of FTTH Russell A stock.

Prior to that, FTSE Russell had first incorporated A shares into its index system in June 21, 2019 and continued to expand in August, bringing the A share factor from 5% to 15%. Another big index MSCI also welcomed the third A share expansion in November 2019, bringing the proportion from 15% to 20%.

"A shares were included in the international index such as MSCI in 2019. The inclusion factor has increased to 20%, which can be said to be a relatively big progress. It will further enhance the inclusion factor, and the demand for foreign capital for A shares will also increase. This will inevitably lead to more foreign capital flowing into the A share market. The former chief investment officer accepted the interview.

According to the study of Anxin securities, there are two main factors that influence the increase of A shares. The first category is to increase the proportion of emerging market assets to the global allocation of foreign investment. This is usually related to the performance of US stocks and global risk preference. When global risk preferences increase, funds tend to flow into emerging markets. When global demand for hedge increases, funds tend to return to developed economies. The second category is to increase the proportion of China's A shares in the allocation of assets in emerging markets. China's economic fundamentals and international index will affect the proportion of A shares, including the progress of the assets, the trend of exchange rate and the process of financial opening.

A foreign investment private equity investment director in Shanghai said, "for the layout of A shares in 2020, we are more interested in consumption and technology sectors. Although many core stock valuations are very high now, for foreign investment, according to the strategy of foreign capital globalization, the valuation of these more expensive stocks is still reasonable, because similar companies will also be allocated in overseas institutions. The main point is to analyze the logic of the company's future growth, and the valuation is temporary.