Since the beginning of this year, only three of the 121 stock funds have outperformed the Shanghai and Shenzhen 300 Index. In the past year (from September 18, 2006 to September 17, 2007), only two stock funds have outperformed the Shanghai and Shenzhen 300 Index.
"Is the Shanghai and Shenzhen 300 really hard to beat?" According to insiders of fund companies, recently, a group of fund managers discussed this "strange phenomenon" with great anxiety at the party.
Funds can’t outrun the Shanghai and Shenzhen 300.
In the past year, only two equity funds, Huaxia Market Selection and China Post Entrepreneurship Core Optimization, outperformed the Shanghai and Shenzhen 300 Index, rising by 309.87% and 309.48% respectively. In the same period, the Shanghai and Shenzhen 300 Index rose by 303.64%, while the Shanghai Composite Index rose by 215%.
From the beginning of this year to September 17th, only three equity funds outperformed the Shanghai and Shenzhen 300 Index, namely, China Market Select (up 205.31%), China Post Core Preferred (up 193.90%) and Everbright Prudential Bonus (up 166.67%). In the same period, the Shanghai and Shenzhen 300 Index rose from 2,041.05 points to 5,498.91 points, with an increase of 169.42%, while the Shanghai Composite Index rose by 102.63%.
Observing the awkward positions of these three funds, we can find that as of June 30, the second largest awkward position in China’s market selection was *ST Guangsha. At the end of 2006, *ST Guangsha had not yet entered the fund portfolio, but by the mid-2007, the position of Huaxia Market had rapidly increased to 10,699,400 shares, which was just the middle of the big band in which *ST Guangsha rose from 6 yuan to 15 yuan.
From *ST Guangsha, baoshan iron & steel, China Southern Airlines and China Storage Co., Ltd. to Taiyuan Heavy Industry Co., Ltd., China’s market selection is neither greedy nor urgent, and only eats the middle paragraph of the market. The most typical one is Taiyuan Heavy Industry, which opened a position near 6 yuan around June 2006, and got away with it when it rose to 9 yuan.
The optimization of China Post’s entrepreneurial core and the dividend of China Everbright Prudential are typical inverted pyramid operations. In the first half of this year, China Post’s entrepreneurial core gradually increased its position in CONCH and completely ate the stock’s market from 28 yuan to 60 yuan.
Is underperforming the broader market due to the high performance benchmark?
Faced with the embarrassment that the whole fund industry has underperformed the broader market, are fund managers really exhausted in Jiang Lang?
"In fact, on the whole, the performance of the fund sector is still above average. The reason why it underperformed the broader market is mainly because the performance appraisal benchmark is too high." Zhou Liang, research manager of Lipper China, told the Financial Weekly reporter that if the performance of the Shanghai Composite Index is compared, the performance of most equity funds is beyond the broader market.
From the beginning of this year to September 17th, the Shanghai Composite Index rose from 2,675.47 points to 5,421.39 points, an increase of 102.63%. In the same period, data from Galaxy Securities showed that 78 of the 121 equity funds had a net growth rate that exceeded that of the Shanghai Composite Index. All 16 index funds outperformed the Shanghai Composite Index, ranking first among all types of funds with an average net growth rate of 139.32%. Of the 57 partial stock funds, 31 were up to standard, with an average growth rate of 114.14%.
But if calculated by Shenzhen Component Index, the confidence of fund managers will be gone. Statistics show that since the beginning of this year, the Shenzhen Component Index has risen from 6,647.14 points to 18,499.38 points, an increase of 178%. During this period, among the equity funds, only two funds, selected by Huaxia Market and optimized by China Post, reached the standard, and only E Fund SZSE 100TEF exceeded this level. The hybrid fund is completely annihilated, and its performance is lower than this level, whether it is partial stock, balanced or partial debt.
Zhou Liang believes that since the beginning of this year, the sudden emergence of Shenzhen market has boosted the growth rate of the whole A-share market. However, for the sake of controlling risks, fund companies have not increased their positions in Shenzhen, making their performance weaker than that of the Shanghai and Shenzhen 300 Index, which combines the performance of Shenzhen and Shanghai markets.
Institutional game competition upgrade
"If we must find the reason from the performance of the fund, the intensified competition in the A-share market may be an important reason." Zhou Liang told reporters that during the bear market from 2002 to 2004, the net value shrinkage rate of most funds was less than the decline of the stock index, and some funds even made small profits during this period by tapping the "five golden flowers" and "blue chip concept".
"In the bear market, the net shrinkage rate is less than the performance benchmark, which is also considered to outperform the market. However, it is increasingly difficult to ask the fund to surpass the market now, because the investor structure of A shares has undergone fundamental changes. " Zhou Liang said.
According to the data of Galaxy Securities, as of June 30, 2007, the net assets of 347 funds in the A-share market totaled 1,799.073 billion yuan, of which the net assets of stock-oriented funds reached 1,671.120 billion yuan, accounting for 31.25% of the circulating market value of Shanghai and Shenzhen A-shares.
Zhou Liang believes that before 2005, fund assets accounted for a relatively small proportion of the circulating market value of A-shares, and the main competitors of funds were retail investors. However, with the extraordinary growth of fund scale in recent two years, it has evolved into a game between funds. As a result, it is becoming more and more difficult to beat the market.
Reduce the shareholding ratio under the fear of high valuation
"You know it’s a dangerous game, but you have to play it." Not long ago, the investment director of a joint venture fund company privately commented on the current A-share market.
"Take China Aluminum as an example, its stock market value has exceeded 700 billion yuan, which is equivalent to 90 billion US dollars, which is 3.3 times that of Alcoa, the largest aluminum company in the world. "Alcoa’s average P/E ratio is about 11 times, and Chinalco’s P/E ratio is already 50 times. I don’t know which valuation method can support such a price." The person said.
It will be a long-term trend for savings to "move" to the stock market through funds. This forced fund managers with huge sums of money to "wander around" in all sectors of the stock market, and at the same time promoted this sector to become a "valuation highland", it also made that sector a "value depression", and so on, gradually raising the value center of the whole market.
"It’s like wearing three shirts in turn. There is always one that is relatively clean, but the shirt will be washed sooner or later." A fund manager of a company headquartered in Beijing Financial Street told reporters that although the reason told him that the overall valuation of the A-share market was high, he had to look for the so-called "value depression" due to performance pressure.
The fund manager believes that fearing the high P/E ratio of A shares and reducing the shareholding ratio is also a reason why some funds failed to outperform the Shanghai and Shenzhen 300.
Retail investors or trigger chain redemption
Zhang Hongji, general manager of Linfen Jiuxin Investment, believes that the same investment philosophy and the investment model derived from it have led to the increasingly serious phenomenon of similar fund positions. Once the stock market turns and fund investors redeem it on a large scale, the fund industry is in danger of breaking the capital chain.
"Now that the market has risen to 5,400 points, and the increase has exceeded 400% in two years, it is necessary for investors to properly consider the risks caused by adjustment." Zhang Hongji believes that the retail of fund investors may trigger an unexpected chain reaction in the stock market.
At present, fund positions have accounted for more than 30% of the total market value of A-shares. The redemption of a fund is very likely to lead to the decline of a stock, which in turn will cause the loss of the net value of other funds and trigger a larger redemption.
The European fable that a nail destroys a country is likely to be a portrayal of the future of the A-share market, Zhang Hongji believes.
Zhou Liang suggested that "investors with very high risk requirements can consider playing new funds and bond funds." (Reporter Xiao Yang)
Editor: Zhao Xuanxuan
