Broad-based exchange-traded funds have seen massive trading volumes over two days, with industry insiders stating this represents an opportunity born from market declines.
Amid recent market volatility, broad-based ETFs have attracted significant capital through continuous high-volume trading.
On July 14, the A-share market staged a dramatic recovery in the afternoon, forming a deep V-shaped reversal. Concurrently, ETFs such as the ChinaAMC SSE STAR Market 50 ETF, E Fund SSE STAR Market 50 ETF, Huatai-PineBridge CSI 300 ETF, and Harvest SSE STAR Market Chip ETF experienced sustained high trading volumes throughout the session. By the close, the trading volume for each of these ETFs had exceeded 8 billion yuan, significantly higher than their recent averages.
As a benchmark for broad-based ETFs, the Huatai-PineBridge CSI 300 ETF has seen elevated volumes for two consecutive days, trading 7.7 billion yuan on July 13 and 8.305 billion yuan on July 14. On July 13, this ETF recorded a net capital inflow of 5.538 billion yuan.
Mid- and small-cap broad-based ETFs have also attracted strong investor interest. On July 13, the China Southern CSI 500 ETF and the China Southern CSI 1000 ETF each saw net inflows of approximately 6 billion yuan. The ChinaAMC CSI 1000 ETF recorded a net inflow of 4.845 billion yuan, while the ChinaAMC SSE STAR Market 50 ETF and the E Fund ChiNext ETF each received net inflows of 2 billion yuan.
Industry observers interpret this substantial flow of funds into broad-based ETFs as a potential signal for bargain hunting.
July Inflows Approach 180 Billion Yuan
Broad-based ETFs have experienced two days of significantly increased trading volume.
July has seen a pronounced period of volatility and adjustment in the A-share market. The Shanghai Composite Index briefly fell below several key psychological levels during the month, with a maximum drawdown exceeding 6%. Investor sentiment has oscillated between panic and caution. Amid this erratic market behavior, a substantial and targeted flow of capital has been quietly entering the market through broad-based ETFs.
Data from iFind shows that as of July 13, despite a 6.22% decline in the 1,267 equity ETFs tracked across the market during July, 179.4 billion yuan flowed into them, indicating a "buy-the-dip" trend.
A more significant shift is evident in the capital flows of broad-based ETFs. Since the beginning of July, broad-based equity ETFs have seen net inflows of 58.313 billion yuan. On July 13 alone, this category of ETFs recorded a combined net inflow of 44 billion yuan.
Observant investors have noted changes in capital flows within broad-based ETFs during trading sessions on July 13 and 14, with trading volumes for core broad-based ETFs continuing to expand.
The trading volume for the Huatai-PineBridge CSI 300 ETF was 4 billion yuan on July 12, surged to 7.705 billion yuan on July 13, and further increased to 8.631 billion yuan on July 14. On July 13, this ETF attracted a net inflow of 5.538 billion yuan, bringing its latest total assets to 86.883 billion yuan.
ETFs such as the China Southern CSI 500 ETF, the China Southern CSI 1000 ETF, the Huatai-PineBridge CSI A500 ETF, the Guotai CSI A500 ETF, and the ChinaAMC SSE 50 ETF have all shown notably increased trading volumes recently.
Statistics from Xingzheng Quantitative Investment show that, based on all ETFs tracking the respective indices, the three core broad-based ETFs—tracking the CSI 300, CSI 500, and CSI 1000 indices—collectively saw net inflows of 27.768 billion yuan on July 13. Specifically, CSI 300 ETFs saw inflows of 8.493 billion yuan, CSI 500 ETFs saw 7.352 billion yuan, and CSI 1000 ETFs saw 11.923 billion yuan.
Some market participants point out that signals for a potential market shift in July are evident, with the share counts of some broad-based ETFs doubling. For example, the share count of the China Southern CSI 1000 ETF was 3.077 billion at the end of June. By July 13, it had reached 7.12 billion shares, an increase of 131.4%. Such rapid, multiple-fold growth in a short period has historically often coincided with significant institutional accumulation near important market bottoms.
Key Signals from "Smart Money"
Capital is buying on dips, and the STAR and ChiNext boards remain the medium-term focus.
In the view of industry professionals, the massive trading volumes and net inflows into broad-based ETFs convey two clear market signals.
The first signal is that after a concentrated release of pessimistic sentiment, there is a strong willingness among investors to deploy capital at lower levels.
Since July, the Shanghai Composite Index has successively fallen below key levels like 4000 and 3900 points, even breaching its annual moving average at one point, leading to a noticeable increase in panic selling. However, this rapid decline has provided relatively attractive entry points for external capital. GF Fund points out that after global markets experienced high-level volatility and deleveraging pressures, the relative resilience of A-share valuations has become more apparent. The actual impact of external disturbances on China's domestic fundamentals is limited, and investor risk-aversion sentiment is expected to stage a recovery, potentially leading to further market stabilization and a rebound.
From a capital flow perspective, a pattern has emerged over the past two years where sharp declines are often met with large inflows from institutional investors like insurance companies into broad-based ETFs. Compared to individual stocks, broad-based ETFs offer advantages such as portfolio transparency, good liquidity, and risk diversification, making them particularly suitable for institutional capital to establish positions quickly during bottoming phases.
Therefore, institutions view the simultaneous surge in volume for ETFs tracking the three major indices—CSI 300, CSI 500, and CSI 1000—as an indication that the capital inflow is not merely for market support but clearly aims to capture recovery opportunities.
The second signal is that the technology and growth sectors remain an intermediate-term focus that capital is reluctant to abandon, with particular favor shown towards the STAR and ChiNext boards.
On July 14, the SSE STAR Market 50 ETF and the ChiNext ETF led the market in trading volume. Notably, the trading volume for the SSE STAR Market 50 ETF exceeded 10 billion yuan for two consecutive trading days on July 9 and 10, highlighting its popularity.
China Southern Fund believes that despite increased recent volatility in sectors like semiconductors, the core investment themes—such as the commercialization of AI and independent innovation in semiconductors—remain intact. The global memory expansion cycle has begun, with leading overseas equipment manufacturers significantly increasing capital expenditures. This creates a dual growth opportunity for domestic semiconductor equipment companies through import substitution and overseas expansion. Against this backdrop, the willingness of capital to allocate to the technology and growth sectors via STAR and ChiNext board ETFs remains firm.
Faced with this opportunity arising from market declines, several fund companies suggest a more prudent strategy involves balancing medium-term offensive and short-term defensive positions.
GF Fund stated that on the offensive side, technology and growth sectors are likely to remain the medium-term focus. However, in the short term, focus should be on areas where order books, earnings, and industry trends are being realized, such as computing power, semiconductor equipment, and materials. Given that the technology sector is not yet in a significant bubble, high-growth directions still possess some ability to withstand liquidity-related disturbances. On the defensive side, short-term rotation of funds may continue towards high-dividend-yield sectors.
Huang Yisong, a fund manager in the Equity Investment Department I of Penghua Fund, believes that from a medium-term perspective, the favored investment directions have not changed significantly. The first category includes industries achieving high-speed growth through counter-cyclical capital expansion driven by market demand. The second category involves industries that, against the backdrop of intensifying international conflicts, can help meet the nation's urgent needs for industrial restructuring and technological self-reliance, supported by a combination of policy push and market pull. The third category consists of stable assets with clear competitive landscapes, along with opportunities in non-AI stocks that have been oversold.
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