The So-called Vane Effect is Just the Fund Scale Effect

Weekly Reflection

On January 22, the disclosure of the 2020 fourth quarter reports of public funds was completed, and there are several points worth paying attention to:

The discourse power of public funds in A-shares has risen to a new high in nearly 8 years. In November 2014, the Shanghai-Shenzhen-Hong Kong Stock Connect began, and for a long time, the dynamics of Northbound funds became the vane of A-shares, but starting from 2019, the vane effect of Northbound funds has not worked. At that time, I once proposed in “Do Not Blindly Worship Northbound Funds” that the vane effect of Northbound funds is one of the psychology of human misjudgment called “Liking/Loving Tendency” by Charlie Munger. Now with clearer data, we can deepen our understanding as: the so-called vane effect is just the fund scale effect. From the market value and proportion of A-shares held by public funds in the past ten years, it can be seen that since 2019, the proportion of public funds has increased from 3.2% in 2018 to 4.8%, and further increased to 6.56% in 2020, hitting a new high since 2013. The increase in the proportion of market value is the enhancement of discourse power.
Public fund clustering is obvious. Due to the clustered holdings of public funds, stocks such as Kweichow Moutai and Tencent Holdings, although their market value is large, the truly tradable ratio is not much, and new and old fund managers will often use these white horse stocks as basic allocations, causing their market value to hit new highs repeatedly.
At present, public funds have reached more than 8,400, exceeding the number of stocks, and it is more difficult to choose a fund than to choose a stock.
In this unprecedented slow bull market of A-shares, incremental funds will push an industry to a high valuation point and then look for another valuation depression. By pushing in turns, the overall market value of A-shares will be promoted. We must grasp the rotation opportunities and switch industry tracks in a timely manner.
In the fourth quarter, public funds continued to reduce the allocation of the information technology industry, but I personally believe that information technology, especially electronic information and the Internet, are still important economic growth poles and can be allocated appropriately. For high-position consumption stocks such as liquor, positions can be reduced appropriately.

Events of the Week

On the 21st, Biden took office smoothly.

The rescue of the Qixia gold mine has entered a critical stage. Currently, the life support system has stabilized, the return air shaft and the No. 10 borehole have been opened, and there is hope for rescue. However, the mine is deep, the rock is hard, and it is difficult to clear obstacles in the shaft, so the rescue difficulty is very great.

Market of the Week

Period: 2021-01-18 ——— 2021-01-24

Review 2 weeks ago: A-shares welcomed a good start with three consecutive rises, and the turnover of the two markets exceeded 1 trillion yuan for five consecutive days. However, from the market perspective, individual stocks showed extreme 20-80 differentiation. The leading stocks clustered by funds continued to rise, and the PE of some industry leading stocks even exceeded 100 times, while most small and medium-sized stocks fell. Wind industry sectors top 3 gainers were energy equipment, oil and natural gas, chemical raw materials; top 3 losers were office, education, motorcycles. Wind concept sectors top 3 gainers were yellow wine, bicycles, titanium dioxide; top 3 losers were lithium batteries, battery electrolytes, CAR-T.

Review 1 week ago: A-share three major indices were basically flat with last week. Consumption and other sectors clustered by funds in the early stage were sluggish, and public funds began to flow to semiconductors. Wind industry sectors top 3 gainers were motorcycles, telecommunications, banks; top 3 losers were agriculture, precious metals, aerospace. Wind concept sectors top 3 gainers were semiconductors, transportation, Yangtze River Storage concept; top 4 losers were yellow wine, beer, aquatic products, liquor.

Review this week: ChiNext Index surged 8.68% in a week, and the three major indices showed an overall upward trend this month. Shanghai-Shenzhen-Hong Kong Stock Connect showed net inflow for four consecutive weeks, and it can be concluded that there is incremental capital flowing into the stock market. Wind industry sectors top 3 gainers were petrochemicals, chemical fibers, power generation equipment; top 3 losers were telecommunications, insurance, beverages. Wind concept sectors top 3 gainers were rare earth, CRO, medical services; top 3 losers were insurance, mining services, cement index.

Market (%)	Index	This Week	1 Week Ago	2 Weeks Ago	3 Weeks Ago
Shanghai Composite	3606.75	1.13	-0.1	2.79	3.27
Shenzhen Component	15628.73	0.7	-0.25	5.86	3.99
ChiNext Index	3358.24	8.68	0.02	6.22	5.16
Hang Seng Index	29447.85	3.06	0.27	1.2	3.37
HSCEI	1054.06	0.78	0.24	-0.43	-0.43
Hang Seng HK Chinese Enterprises	4031.33	0.93	-0.67	2.4	3.48
Dow Jones	30996.98	0.02	-0.57	1.61	1.58
Nasdaq	13543.06	3.28	-0.87	2.43	0.92
S&P 500	3841.47	1.21	-0.72	1.83	1.79

Market (CNY, Billion)	This Week	Previous Week	2 Weeks Ago	3 Weeks Ago
Shanghai Connect	11.45	44.87	105.37	27.26
Shenzhen Connect	84.62	134.72	85.91	108.56
Hong Kong Connect	798.46	585.95	546.41	229.45

Positions

Code	Name	Current Period Dynamics
SZ000889	Zhongjia Bochuang	Flat
LU	Lufax	Flat
F260104	Invesco Great Wall Domestic Demand Growth Mixed	Reduce
F163406	Xingquan Herun Graded	Add
F166301	Huashang Trend Flexible	Flat
F002083	Xinhua Xin Dongli Flexible Allocation Mixed	Reduce
F005827	E Fund Blue Chip Selected Mixed	Flat
F004851	GF Medical Health A	Add
F010013	E Fund Information Industry Selected Stocks	Add