China's 'national team' purchases of ETFs reach $57 billion this year, UBS says

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China's “national team” of major state-backed financial services companies has pumped 410 billion renminbi ($57 billion) into domestic stock exchange-traded funds so far this year, according to UBS estimates.

Analysts at the bank said they obtained the figure by making estimates based on trailing transaction calculations for 54 Chinese exchange-traded funds.

Strategists at the Swiss bank estimated that ETFs tracking the CSI 300 account for more than 75 percent of inflows and that flows into CSI 500-linked products account for 13 percent of net sales.

They said the national team bought equity ETFs worth RMB1.24 trillion between July and September 2015, and that the RMB410 billion it has injected so far this year is “well below the historical level, with the potential to rise further under extreme conditions.” “.

This article was previously published by Ignites Asia, a title owned by FT Group.

The national team has been instrumental in stabilizing China's stock market, and one of the key participants is Central Huijin Investment, part of the $1.2 trillion Chinese sovereign wealth fund China Investment Corporation, which has joined forces with local asset managers and insurance companies. State-backed purchase of ETFs as ETFs. Part of efforts to boost the beleaguered stock market of the world's second-largest economy.

“We like the Chinese domestic market more than the overseas market because the domestic market has political support with evidence of buying into national teams,” Sunil Kaul, Asia-Pacific equity strategist at Goldman Sachs, told Bloomberg TV.

The CSI 300 rose more than 7 percent in February, and some professional investors expect further gains due to low valuations and light positions among money managers.

UBS's estimate of ETF investments in Chinese stocks by the country's national team comes after Central Huijin said this month that it had expanded its holdings of ETFs “in recent days.”

“The company will continue to increase its revenues [ETF] “Holdings and expanding the scale of holdings, so as to protect the stable operation of the capital market,” Central Huijin wrote, without revealing the amount involved.

The government fund added that it “fully recognizes the value of the allocation to the current A-share market.”

The announcement was quickly followed by the China Securities Regulatory Commission issuing four notices pledging greater efforts in channeling long-term capital into the market, reducing short selling, supporting government purchasing and requiring listed companies to take various value-enhancing measures. of investment.

CIC pledged that playing its part in the country's ongoing market stability and risk management initiatives will be one of its strategic priorities for this year.

The capital commitment from CIC comes on the heels of Chinese state policymakers implementing a series of market-boosting measures in a bid to support the country's faltering $9.7 trillion stock market.

*Ignites Asia is a news service published by FT Specialist for asset management professionals. Trials and subscriptions are available at ignitesasia.com.