China ETF Buying Spree Prompts Questions on Who’s Driving Rally

Large inflows into two exchange-traded funds that count a Chinese state firm as their biggest backer are prompting analysts to question whether there are larger forces at play behind this week’s rebound in stocks.

The Huatai-Pinebridge CSI 300 ETF, which tracks the benchmark gauge, recorded inflows of 6.05 billion yuan ($946 million) on Tuesday, the most since July 2015, according to Bloomberg data. Another fund, the China CSI 500 ETF also logged nearly 280 million yuan of inflows, the biggest in over a week.

Both funds -- among the top five equity-focused ETFs in China by assets -- had Central Huijin Investment Ltd. as their biggest holder as of the end of December with a stake of at least 28%, according to company filings. Central Huijin is an arm of China’s sovereign wealth fund and one of its units, Central Huijin Asset Management, was created to buy equities during a 2015 rout as part of what investors called the “national team”.

Central Huijin could not immediately be reached for comment by phone or email.

China ETF Buying Spree Prompts Questions on Who’s Driving Rally

That led Kaiyuan Securities Co. analysts to make a call that the unknown buyers who were part of a stock rally last summer have come back to the market.

“The return of mysterious forces means that this could be a repetition of July 2020,” with “big net purchases” of ETFs that are largely held by Central Huijin and short term overseas investors driving northbound inflows, analysts including Mou Yiling wrote in a Wednesday note.

China’s benchmark CSI 300 Index jumped 3.2% on Tuesday, the most since July as investors piled into stocks amid attempts by policymakers to contain commodity prices while the Chinese currency advanced. Overseas investors net purchased 21.7 billion yuan worth of A shares via links with Hong Kong, the highest amount ever. The stock gauge advanced 0.2% as of 2:00 p.m. local time Wednesday.

©2021 Bloomberg L.P.

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