China ‘national team’ ETF buying reaches $57bn this year, says UBS

China’s “national team” of major state-backed financial services companies has ploughed Rmb410bn ($57bn) into local equities exchange traded funds so far this year, according to UBS estimates.

Analysts at the bank said they derived the figure by making estimates based on calculations on excess transactions for 54 Chinese ETFs.

The strategists at the Swiss lender estimated that ETFs tracking the CSI 300 Index have accounted for more than 75 per cent of the inflows and that flows into products linked to the CSI 500 index have represented 13 per cent of net sales.

They said the national team purchased equities ETFs worth Rmb1.24tn between July and September 2015, and that the Rmb410bn sum they have 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 the FT Group.

The national team has been instrumental in stabilising China’s stock market, and one of the major participants is Central Huijin Investment, part of China’s $1.2tn sovereign wealth fund China Investment Corporation, which has joined state-backed local asset managers and insurers in purchasing ETFs as part of efforts to boost the beleaguered stock market of the world’s second-largest economy.

Sunil Koul, Asia-Pacific equity strategist at Goldman Sachs, told Bloomberg TV “we like the China domestic market more than the offshore market because the domestic market has policy support with evidence of national team buying”.

The CSI 300 index has risen over 7 per cent in February, and some professional investors expect further gains because of low valuations and light positioning among money managers.

The UBS estimates regarding Chinese equities ETF investments by the country’s national team come after Central Huijin said this month that it had expanded the scope of its ETF holdings “in recent days”.

“The company will continue to increase its [ETF] holdings and expand the scale of the holdings, so as to resolutely safeguard the stable operation of the capital market,” wrote Central Huijin, without disclosing the amount involved.

The state fund added that it “fully recognises the allocation value of the current A-shares market”.

The announcement was quickly followed by the China Securities Regulatory Commission issuing four notices that pledged to make greater efforts in guiding long-term capital to enter the market, curb short selling, support state buying and require listed companies to take different measures to enhance the value of investment.

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

The capital commitment from CIC follows Chinese state policymakers’ implementation of a string of market-boosting measures in an effort to shore up the country’s struggling $9.7tn stock market.

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