Driven by blue-chips sector which are favored by capitals recently, A-share market enjoys prosperity, while real estate and bond markets turn pale. Many senior market participants think that the major reason for this seesaw effect is that off-market capitals are accelerating to flow from real estate market, bond market, financial management of banks and even futures market with tightening regulation to stock market.
In the opinion of market participants, off-market capital is like water and keeps flowing in stock market, real estate market and bond market so as to seek balance between risk and earning. After remarkable fluctuation in stock market last year, a great number of capitals retreated from stock market and flowed into bond market, futures market and real estate market, which boosted housing prices in tier-1 and tier-2 cities to surge in the first half of this year. Prices of black futures products including coke, coking coal and deformed steel bar surged surprisingly by more than 3 times when compared with those at the end of last year, and agricultural commodity futures prices also grew by 1.5-2 times. Bond yield rate is only second to that of commodity market during January and October of this year. This means that other large category of assets all outperform stock market since the middle of last year.
But this phenomenon is quietly changing. Although futures market is still booming recently, famous private funds which are focusing on futures market since the beginning of this year begin to close futures positions and plan to transfer part of futures capitals to stock market. Some commodity futures experienced an extreme change from soaring to the daily limit to dropping to the daily limit just in a short period on Nov. 11 and then fluctuation in futures market got worsened. Opinion of certain senior investor is quite typical that after the middle of last year, some capitals of stock market were invested in futures market for a short period; but in view of growing risk in futures market, these capitals retreated from futures market to stock market again.
“Capitals of some institutional investors in futures market is now flowing back to stock market, but what is more profound than capitals flowing from futures market to A-share market is that capitals in the bond market and capitals of financial management of banks also turn back to stock market.” said Ye Gang, president of Shenzhen Qifu Investment Co., Ltd., who successfully avoided stock crash in last year and is good at overall market operation.
Off-market capital preference saw obvious changes which were good for stock market since October. Besides capitals in futures market, capitals in bond market are also flowing back to stock market. Since late October, bond market suffered decline continuously and 10-year bond yield hit new high since the beginning of the second half of this year. The third-parity survey results show that owing to economic stabilization, inflation expectation and increasing risk preference, more than 50 percent of interviewed bond investors begin to be bearish on bond but rosy about stock market.
Financial product yield of banks is falling on the whole since the beginning of this year. 7-day annual yield of Yuebao is only around 2.5 percent, which cannot be compared with 7 percent two years ago. As financial product yield decreases, investors who previously made investment in financial product of bank have to change their strategy to turn to stock market. As this kind of capital is with low risk preference, blue-chip stocks with low valuation and high dividend become the priority target seeing increasing positions by the capital.
Anbang Insurance Group recently purchased stocks of China State Construction Engineering Corporation Limited to the five percent limit through private placement at about 10 billion yuan, showing attraction of low valuation and high dividend of blue-chip stocks to low-risk capitals. According to statistics, PE ratio of SSE 50 Index which is mainly composed of financial stocks is only about 10 times and that of CSI 300 Index is about 13 times. Dividend yield of about 40 individual stocks exceeds 4 percent and that of nearly 100 individual stocks is about 3 percent. Blue-chip stocks are in low valuation now, providing good condition for various capitals.
Translated by Vanessa Chen
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