A-share markets experienced significant volatility last week amid geopolitical tensions. Following a brief post-holiday rebound, capital outflows resumed. Huatai Securities analysts suggest two primary factors driving these substantial fluctuations from a liquidity perspective: 1) The current round of margin trading inflows can be traced back to June 2025, with accumulated paper profits potentially prompting exits. However, outstanding margin balances remain near 2020 highs, with average collateral ratios still exceeding 290%; 2) Rapid increases in the securities-to-cash ratio for margin trading collateral. Key observations indicate: 1) Partial market liquidation occurred during the latter half of last week's decline; 2) Amid consensus expectations of continued volatility, active equity funds and ETFs demonstrated strong absorption capacity.
**Core Perspectives** **Focus 1: Partial Market Liquidation Occurred** Last week's overseas risk events triggered wide swings in A-shares, with tactical capital resuming outflows after a brief post-holiday return. The difficulty in sustaining trend inflows may stem from: 1) Substantial unrealized gains from earlier positions, with margin balances at multi-year highs and collateral ratios above 290%; 2) The securities-to-cash ratio for margin collateral reaching 26% by late February. However, post-decline metrics show improved conditions: the collateral ratio dropped to 20%, margin trading activity fell below 10%, and participating investor numbers returned to pre-holiday levels.
**Focus 2: Strong Capital Absorption During Volatility** Despite heightened volatility in the latter half of the week, capital demonstrated notable absorption capacity by Friday: 1) Broad-based ETFs shifted to net subscriptions of 1.7 billion units, attracting 3.9 billion yuan; 2) Active equity fund positions rebounded significantly, with general equity funds rising from 86.7% to 87.8%; 3) Weekly repo volumes strengthened while major shareholder net reductions eased, indicating reduced supply-side pressure.
**Weekly Capital Flow Overview** Retail investors: Net outflows of 22.961 billion yuan last week, with inflows to nonferrous metals, utilities, and banking sectors, while machinery, chemicals, and computing sectors saw outflows.
Margin trading: Net outflows of 24.184 billion yuan, with activity dipping to 9.17% and average collateral ratio slightly declining to 290.24%. Sector-wise inflows favored petroleum/transportation, while electronics, computing, and new energy sectors experienced outflows.
Mutual funds & ETFs: New fund approvals declined week-over-week, primarily mixed and ETF products. Existing equity fund positions edged up alongside slight improvements in new issuance momentum. ETFs saw net outflows of 18.8 billion yuan overall, with broad-based ETFs accounting for 38.4 billion yuan in outflows. Cyclical and healthcare sectors led inflows, particularly nonferrous metals, petrochemicals, and basic chemicals.
Foreign capital: EPFR data shows configured foreign inflows of 8.02 billion yuan during February 25-March 4, comprising 1.15 billion yuan active and 6.87 billion yuan passive allocations.
**Risk Factors** 1) Potential failure of position estimation models 2) Possible statistical data inaccuracies
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