UBS Equities-China Equity Strategy _Mutual fund purchases and redemptions...-109803026(1)

abc12August2024GlobalResearchandEvidenceLabChinaEquityStrategyMutualfundpurchasesandredemptions:Reasons,flowandoutlookActiveMFscontainedbypastperformance;passivefundunitsincreasedRecentmutualfund(MF)redemptionsandtheirimpactontheA-sharemarkethavedrawninvestors'attention.Inouranalysis,wedivideMFsintoactivefunds(includingflexible,equity-orientedhybridandcommonstockfunds)andpassivefunds(includingindexfunds,exceptETFfeederandenhancedindexfunds).1)Activefundshaddecreasesof136.7bnunitsinQ124(thelargestquarterlyfallinthepastdecade,exceptforQ315)and56.8bnunitsinQ224.Historically,activeMFs'returnshaveservedasaleadingindicatoroffund-raisingperformance.AmidanoverallA-sharemarketdownturninthepasttwo-plusyears,equity/hybridMFshavecorrected36%/28%sinceearly2022.Money-losinginvestorsmaybereluctanttobuymorefundproductsoreventoredeemtheirunits.2)Passivefundspostedanincreaseof207.7bnunitsinH124.ParticularlyinQ124,theirAUMexpandedasharpRmb311.3bn,thelargestquarterlygainintheirhistory.Importantly,thesubstantialpassivefundAUMexpansionmainlyreflectedinvestorpursuitofbroad-basedETFs,especiallythosetrackinglarge-capbluechips.YTD,theCSI300IndexEFThasreceivednetinflowofRmb400bn,whilesector,themeandstyleETFshavehadnetoutflowoverall.Wherecouldredemption-associatedmoneygo?Capitalflowisintricateandhardtotrack.Afterredeemingtheirunits,MFin...