Changpeng Wan
Surging Returns in Volatile Markets
Last week witnessed extraordinary activity in China’s ETF markets, headlined by the Hong Kong Securities ETF (513090) delivering a market-leading 12.85% weekly return amid frenetic trading activity. The staggering 839.38% weekly turnover rate – equivalent to the fund’s entire holdings changing hands over eight times in five days – underscores intense investor interest in Hong Kong-listed financial equities. This remarkable performance occurred against a backdrop where thematic ETFs dominated returns, with rare earth-focused funds exceeding 10% gains while gold and Japan-focused funds languished. Regulatory approvals for new Shanghai-index tracking ETFs and surging institutional flows into Chinese technology funds signal continued market evolution.
ETF Market Performance Highlights
Here are the core drivers behind last week’s standout performances:
- Hong Kong Securities ETF dominated with 943.36B yuan volume – higher than total mainland turnover during 2021 market slump
- Rare earth ETFs outperformed commodities benchmarks by 400 basis points
- Cross-border gold strategies recorded negative returns despite global price stability
Unpacking the Hong Kong Securities ETF Rally
The catalyst emerged from bullish brokerage sector activity, particularly among Hong Kong-based financial institutions. Unlike mainland counterparts primarily driven by policy speculation, HK brokers saw fundamental improvements from rising IPO volume and regional capital inflows. With global investors reallocating to undervalued Asian markets, Hong Kong securities became prime beneficiaries – a structural trend that supported the ETF’s record 380B yuan single-day turnover on July 11.
Regulatory Developments Reshaping the ETF Landscape
New Shanghai Index Products Approved
The CSRC greenlit innovative products including:
- SSE 380 ETFs and associated feeder funds
- China’s first SSE 580 ETFs enhancing large-cap exposure
ChiNext Composite Expansion
Seven fund managers simultaneously filed for ChiNext Composite ETFs following methodology changes by Shenzhen Stock Exchange. The coordinated filings suggest anticipation of heightened retail participation in growth-oriented enterprises.
Strategic Market Outlook
Cyclical Rotation Opportunity
E Fund’s index research head Pang Yaping (庞亚平) observes: “Mid-term credit cycle indicators suggest relief from previous pressures. A500 and CSI 300 stand to directly benefit from margin normalization after consecutive months of loan growth recovery.” The cyclical recovery thesis gained traction with capital flowing back into banking ETFs despite broader market caution.
Defensive Positioning Perspectives
Shangyin Fund maintains cautious allocation guidance for Q3:
- Prioritizing innovative pharmaceuticals and gold as volatility hedges
- Identifying AI application stocks for tactical allocations
Capital Flow Analysis
The divergence between thematic winners and laggards illuminated distinct institutional preferences:
- Chip manufacturing and coal ETFs led sector inflows despite ESG headwinds
- A500 index funds saw strongest institutional demand among broad-market products
- Fixed-income ETFs surprisingly dominated turnover rankings even during equity rally
Hong Kong Securities ETF simultaneously topped both inflow and volume charts, confirming its dual appeal for tactical traders and long-term positions.
Actionable Investment Implications
Institutional consensus indicates rotational opportunities toward cyclical Chinese assets while monitoring derivative liquidity risks. Retail traders should note the velocity of specialized ETF movements requires technical discipline – rapid-turnover environments demand strict position-sizing protocols. Prospective ETF investors might consider phased entries into newly approved Shanghai-index products rather than chasing headline-grabbing weekly performances.
