Off-exchange funds focused on core assets are here! The market is set to receive additional funds.
Following the listing of the first batch of CSI A500 ETFs, the first batch of off-exchange index funds tracking the CSI A500, "Lightning," has been approved. The Zhong Ou CSI A500 Index Initiated Securities Investment Fund (Class A: 022432, Class C: 022433) will be officially launched on October 25th.
This year, index funds have entered a new stage of development. Large institutions have significantly increased their purchases of broad-based indices, and more and more institutional investors are participating in index fund investments.
At the same time, various types of index funds continue to "roll out new products," making index funds one of the important tools for incremental funds to layout in A-shares.
Compared to the past, individual investors' approach to participating in the market in this round of A-shares has also changed. In the past, everyone liked to find big stocks that could double in a month. Perhaps it's because the market is becoming more and more efficient, or perhaps it's because of past mistakes, the concept of short-term pursuit of quick wealth is gradually fading.
Now the market is no longer obsessed with pursuing "surprise," but expects "uprightness," like the "mature market investment method" advocated by Buffett. Many investors hope to share the dividends of corporate growth through index funds.
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Why is it said that A-shares are undergoing a huge change?
As investors' understanding of indexed investing deepens, the demand for fund products tracking different indices is also growing.
For example, the recently very popular CSI A500 Index not only brings incremental funds to the market but also has received a great response to the issuance of the CSI A500 funds.The second batch of funds tracking the CSI A500 Index is also being rapidly reported and approved, including some larger fund companies.
In the past, the development of the stock market in developed countries has been ups and downs, and a large amount of capital was invested in index funds in the later market. Now, many investors in A-shares are also learning from the investment methods of developed countries' markets and investing in index funds.
In fact, it's not only investors who are "rolling", but also fund companies that are working hard to adapt to this trend. If they cannot go with the flow, they are also very likely to fall behind.
For example, Zhong Ou Fund, which is known for its active management, has also begun to focus on the layout of index products and has significantly accelerated this year. Public data shows that as of October 21, 2024, Zhong Ou Fund has newly established 14 index funds this year.
This time, Zhong Ou Fund's issuance of the A500 Index Fund is also in response to the changes in market demand, providing investors with a variety of investment options to meet different investment needs and risk preferences.
Overall, the issuance of this CSI A500 Index Fund has met the needs of investors who hope to obtain average market returns through index investment, which is of great significance to the capital market.
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New compilation ideas, new market investment tools
Since the beginning of this year, with the support of various favorable policies, market sentiment has gradually warmed up, and after 924, a rare epic surge in the market has occurred. In just a few trading days, stock ETFs have continuously set new records in many aspects. According to Wind data, on October 8, the total transaction volume of stock ETFs exceeded 340 billion yuan, setting a historical record, and the total scale broke through the 3 trillion yuan mark for the first time.
Index funds usually have lower management fees and transaction costs because they mainly invest passively by tracking indexes, without the need for frequent active trading and research analysis. This provides investors with a low-cost investment channel, and a large amount of capital chooses index funds to enter the stock market.The launch of the CSI A500 Index Fund coincides with the country's introduction of multiple policies to support the economy and stock market during a "honeymoon period."
In response to the significant index products introduced in this market cycle, Song Weiwei, the拟任 fund manager of the upcoming China Europe CSI A500 Index Fund, stated:
Since September, policies have become more proactive. In addition to the central bank's policies on reserve requirement ratio cuts and interest rate reductions, a 300 billion yuan special re-lending facility for stock buybacks and increases, as well as a 500 billion yuan swap facility for securities, funds, and insurance companies, have been established to directly support the capital market. At the same time, fiscal policy has shifted, with the Ministry of Finance indicating that the central government will support local governments in resolving debt issues, easing the burden on local governments, and guiding the real estate market to stabilize and rebound. From the perspective of international financial markets, the Federal Reserve's interest rate cut cycle has begun, ushering in a new cycle of global capital flows, with overseas funds starting to flow back into domestic equity assets that are undervalued. The dual resonance of domestic and international financial capital cycles brings multiple benefits. As a significant index product introduced during this market reversal, the CSI A500, which balances core assets and industry leaders in its index compilation, is expected to effectively track the development trend of A-shares in this cycle.
The new "Nine National Articles" propose to establish and cultivate a market ecology for long-term investment, improve the basic systems compatible with long-term investment, and construct a policy system that supports "long-term capital for long-term investment." At the same time, a fast approval channel for Exchange-Traded Funds (ETFs) has been established to promote the development of index-based investment.
It is against this backdrop that the CSI Index Company has released the CSI A500 Index.
This time, the CSI A500 has improved its compilation approach, covering the selection method of leading companies in three-tier sub-industries, which helps to include high-quality companies at a smaller market value.
From this characteristic, the A500 indeed provides a new compilation approach. Furthermore, in conjunction with the background of the times, the CSI A500 Index also carries the stock market's expectation for the economy to enter a stage of high-quality development.
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Funds Flood into the CSI A500 Index Fund
Wind data shows that the first batch of index funds tracking the CSI A500 received more than 13.4 billion yuan in net inflows within four trading days after listing.The CSI A500 is favored by capital because it aligns with the perspective of the new era and features a balanced allocation. Specifically, the compilation approach of the CSI A500 is as follows:
Firstly, it focuses on core assets. The CSI A500, with less than 10% of the total number of stocks in the A-share market, accounts for 59.7% of the total market value and 62.5% of the total operating income (TTM: trailing 12 months operating income, calculation method详见wind), reflecting a strong representation of China's overall capital market.
At the same time, the weight of the top ten samples is relatively low. The combined weight of the top 10 constituent stocks is 20.99%, which is lower than the 53.62% of the CSI A50 and the 22.9% of the CSI 300. From this compilation approach, it helps to control the investment proportion of a single stock, avoiding excessive concentration risk and potential emergencies.
Secondly, it includes more industry leaders. The special mechanism of selecting securities with the largest free float market value in the third-level industry or with a total market value ranking in the top 1% within the sample space determines its high coverage of the third-level industries of the CSI, with the index currently covering all 35 second-level industries and 91 third-level industries of the CSI.
Furthermore, the "new quality productivity" content is higher. The index has a prominent content of emerging industries, with the constituent stocks' "new quality productivity" of the first-level industries such as industry, information technology, raw materials, health care, and communication services accounting for more than 60% of the total weight, which is in line with the new trend of China's high-quality economic development stage.
Lastly, it has a stronger "international style". The compilation concept of the CSI A500 index is in line with international standards, introducing ESG screening standards and interconnectivity mechanisms, which facilitates medium and long-term allocation by domestic and foreign funds. (Data source: wind, cutoff date: 2024/9/30, classification standard: CSI industry classification)
Overall, as a major core broad-based index, the launch of the CSI A500 and the filing and issuance of funds linked to it have attracted attention in the industry.
As another new product in the China Europe index toolbox, the China Europe CSI A500 Index Launch Fund (Class A: 022432, Class C: 022433) will be officially launched on October 25, becoming the first batch of off-exchange index funds tracking the CSI A500 index.
In the past two years, the development of off-exchange funds has been rapid, which is also one of the reflections of the rapid growth of China's capital market. The iteration and renewal of fund products have met the needs of different investors.
Unlike on-exchange index funds, off-exchange index funds have the convenient advantages of being able to be invested in fixed amounts, being able to be purchased through banks and internet channels, and not needing to open an on-exchange account.Looking at the development of A-shares, the launch of the CSI A500 Index not only reflects the transformation and upgrading of China's economy but also provides domestic and foreign investors with a new market benchmarking tool. This helps to guide capital flows towards sectors related to new productive forces and promotes the healthy development of the capital market.
With continuous positive guidance from policies and capital, it is believed that the development of China's capital market will also move towards a healthier and more mature direction. Investors will also be able to reap the dividends of economic development.
- 30 May'24
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