The Battle Between Funds: The Original Sin Of Market Collapse Or The Necessary Stage Of Market Transformation?

Fund group has become the most concerned topic in the market.

In particular, with the increase of the volatility of institutional group stocks, on the one hand, the market is worried about the market impact caused by the collapse of the group; on the other hand, referring to the mature foreign markets, institutional group building will become a normal phenomenon of "28-28 differentiation" in the securities market.

Relative to the A-share market, the pain has already occurred.

How to understand the current group of A-share market?

The 21st century economic reporter found that the attitude of institutional investors in this particular stage is still more complex, and the confusion still exists under the contention of different views.

The market worries brought by the collapse of Baotuan

In this group of shares crazy rise of the moment, the market funds are increasingly worrying.

Do you want to reduce your position? When is the reduction time? Will institutions collapse?

As a matter of fact, the market turbulence that may be brought about by the collapse of the group has been very obvious.

According to the re trading of China Merchants Securities, according to the previous re trading of a shares, similar situations have occurred four times, namely, group finance in 2007 q1-2010q1, lasting for 13 quarters; consumption conglomeration for the first time in 2009 q3-2012q3, lasting for 13 quarters; clustering in information technology from 2013q1 to 2016q1, lasting for 13 quarters; and the second consumption conglomeration from 2016q1.

"Like every group, the first few hesitations are always a better chance to add positions. The initial shaking is for a tighter group, getting off the bus again and again, regretting and getting on the bus again and again, constantly strengthening the belief of holding shares, forming the most firm group, and ushering in the final bubble." China Merchants Securities said.

According to the market performance after the collapse of the group, for example, in the first quarter of 2010, the financial sector, especially the banks, had no performance flexibility, and institutional investors turned to group consumption.

Correspondingly, from mid April 2010 to mid July 2011, the overall financial index fell by 20%, while the index excluding finance increased by 2% in the same period.

By the end of September 2011, the financial index had fallen by more than 30%.

For the current market, the focus of the controversy is whether the group will disintegrate or not, and how much influence it will have after the collapse.

"The stocks that you are optimistic about are more and more concentrated, the buying funds are more and more large, and when the increase is higher and higher, the stock price will be overdrawn. At this time, the cost performance ratio of stocks or investors will become worse, so I think it is risky to hold them together until today." Zhang Kexing, chairman of gray assets, told the 21st century economic reporter.

There are not a few institutions that hold this view.

"We can't predict when Baotuan will be disbanded, and there must be risks, but the key is to keep the long-term investment thinking. We don't expect to get as high returns this year or in the future as in the previous two years," said Zhang Kexing. "The main reasons for the dissolution of Baotuan are liquidity turning point and inflation expectations. These two factors are mixed with the rise of interest rates, leading to the decline of valuation, This will bring harm to the whole market in the future. The performance is to kill the valuation. In this process, if the valuation itself is very high and the performance is not strongly supported, such stocks will lose more miserably, so it will bring double killing. If the valuation is not high or low now, and the performance can maintain high growth, even if there is a short-term valuation downkill, such enterprises will also get the benefits brought about by performance growth in the future. "

"Institutional group stocks are not immutable. Superimposed factors such as economic fundamentals and monetary policy will lead to a shift in market style. At this time, group stocks will switch and risk will easily occur." A mutual fund manager in Beijing said.

However, he also mentioned another thought-provoking point: in fact, the root cause of each collapse is the emergence of better performing sectors.

The necessary stage of mature market

Although the impact of the collapse of the past few times still remains, many insiders in the industry pointed out in the interview that the current phenomenon of organization grouping is different from that in the past.

Wang Delun, chief strategist of Societe Generale Securities, pointed out that from the perspective of the long-term development of a shares, the current "organization group" is not the "organization group" in the past.

Its core logic is that a group of high-quality core assets stand out and become "not for sale" in the QE era. With the advancement of the process of A-share's U.S. share, core assets are on the way. China's core assets are scarce all over the world and become the best "not for sale" to resist devaluation in the QE era.

"Referring to foreign mature markets, it is a normal phenomenon for institutions to group together. Matthew effect makes institutional funds more and more concentrated. In the long run, it will also be the long-term trend of domestic A-share market in the future." According to an interview, a securities firm is the director of equity of public funds.

It is not a unique phenomenon in China, but a common feature of the world's capital markets. The leading investment institutions in the United States have long embraced the top 10 companies. Apple, Amazon, Microsoft, Google, Facebook and Tesla alone account for 50% of the total market value of NASDAQ.

"As mature investors managing large funds, institutions will not buy these companies for no reason. They must have excellent investment logic, which is not necessarily accepted by public investors. However, from the perspective of nearly 100 years' history, institutional investors dominate the capital market." Kang Shuiyue, chairman of Danyang investment, told reporters of the 21st century economic report.

A data shows that according to CICC's calculation, the proportion of individual investors holding shares in the circulating market value has decreased from 95.4% in 2003 to 51.8% in 2020.

People close to the regulators also predicted that the ratio would be lower and lower when communicating with our reporter.

"After 17 years, the proportion of individual investors in the circulating market value has decreased by more than 40%, and there must be a very large space for decline in the future. It is becoming more and more difficult for individual investors to obtain excess returns in the A-share market. When their investment returns are far less than those of institutions, they will join the general trend of subscription funds, which will last for a long time. " The fund manager pointed out.

This also means that the pricing ability of institutions in the future A-share market will be improved day by day.

"Dispute" of investment idea

With the increase of the proportion of institutions, can it be more conducive to the implementation of long-term value investment ideas and methods, and promote more rational pricing in the A-share market while improving its own pricing ability?

This is still a key issue for institutional investors to focus on.

Guotai Junan Securities also believes that the essence of the group at home and abroad is convergence, which is focused on pursuing "certainty premium". Although there are doubts about style switching in the market, the risk preference is still low due to the focus of capital on the boom, so the switching probability is small.

There is also a logic in its eyes. Before the liquidity inflection point appears, the track and competition pattern are the premise of incremental capital consideration. With the long-term expansion of capital investment, blue chip leader is still the first choice.

"We should pay more attention to the stage, the logic and the quality of the underlying assets of the groups." Kang Shuiyue said.

In his view, it is certain that the present is not a stage of disintegration. If it is the collapse stage, this process will be accompanied by panic smashing and significant amplification of trading volume, but from the recent two weeks, this sign has not appeared.

"If only the market criticizes the organization and does not have the fundamental impact, the organization group is very difficult to disintegrate. If the group does not disintegrate, the institutions behind it will only be more closely held. Over a long period of time, we may only be in the middle stage of institutional convergence. " Kang Shuiyue thinks.

The logic of institutional conglomeration lies in the selection of individual stocks in Shanghai and Shenzhen stock markets, especially the selection of 300 component stocks in Shanghai and Shenzhen stock markets to select super brands with long-term investment value; whether the industry in which the underlying assets are located is in the upward business cycle is the core variable, which determines the duration of institutional clustering and the degree of closeness.

"In the past two years, the loose liquidity and the pursuit of leading certainty premium are behind the centralized holding of institutions, which has its rationality." Boshi Fund believes that.

The current market background is that under the global low interest rate or even negative interest rate environment, residents' wealth gradually flows from real estate to equity market. At the same time, the competitive advantage and profitability toughness of leading companies in various industries are becoming more and more obvious.

This has also led to many institutions' heavy positions in the equity assets of leading enterprises.

Boshi Fund believes that in the hot issue tide, after the fund's profit making effect has been greatly improved in the past two years, the fund has also naturally chosen to strengthen the market's trend of holding large public shares.

Behind the group disputes, perhaps the development of the capital market needs more "not for sale" assets to consolidate.

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