德意志銀行：這次可能不一樣MSCI21日納入A股概率大解密中國A股巨鯨——國家隊

新聞 06-16

德意志銀行：這次不一樣MSCI21日納入A股概率大解密中國A股巨鯨——國家隊

基本結論：MSCI這次納入A股的概率比前三次大，國家隊主要是維穩，國家隊可能賣藍籌.....

Q1: What is the 「National Team」? (pages 2~3)

國家隊是誰？

The 「National Team」 refers to a group of institutions set up by the Chinese government during the A-share market rout in 2H15; the 21 known entities include the CSF, Central Huijin, SAFE, and several mutual funds. We estimate that they held stock in roughly 1,400 A-share companies worth Rmb1.4tr, or 8.1% of the free-float market cap in 3Q15, which eased to Rmb1.1tr, or 5.4% of the market in 1Q17, when they offloaded positions amid market normalization.

Q2: What A-share positions do they hold? (pages 4~6)

他們有多少股票？

As of 1Q17, the banks, industrials and discretionary sectors accounted for 25%, 18% and 8% of the National Team』s holdings, respectively; on a relative basis, they OW banks (+12.7ppt), insurance (+3.6ppt) and energy (+3.1ppt), and UW IT (-5.7ppt), discretionary (-4.5ppt) and property (-3ppt). We notice

that their holdings represented 13.6% and 9.1% of the free-float cap of SSE50 and CSI300 indices respectively, moderating from 15.6% and 11.7% in 3Q15.

Q3: How do they behave in the market? (pages 7~9)

他們是如何乾的？

Contrary to popular perception, we find that the National Team tends to be a market stabilizer, i.e. they sell outperformers while buying laggards, rather than being relentless buyers that aim to raise equity indices; we have identified a similar offsetting pattern on both the sector and single-stock levels.

Following this observation, we highlight a list of top 20 outperformers with sizable National Team holdings (Figure 16) as potential selling targets ahead.

Q4: Have they been driving the recent blue-chip rally? (pages 10~15)

他們是藍籌股的推手嗎？

We do not subscribe to the widespread view that the recent blue-chip rally was mainly about the National Team. Our reasons: 1) they have been reducing A-share exposure; 2) they have been acting as a stabilizer instead of an amplifier, and 3) they are not involved in HK equities and ADRs, which have

also had a large-cap blue-chip rally. For instance, their holdings in banks have been quite high since inception and remained largely stable in recent quarters.

We attribute the recent blue-chip rally primarily to a combination of 1) stronger corporate fundamentals: recovery in growth, profitability and financial strength; and 2) increasing institutional participation: a reallocation to equities as bonds lagged with a growth recovery and A-share volatility eased to

historical lows, partly thanks to National Team efforts.

Q1: What is the 「National Team」?

The 「National Team」 (國家隊) refers to a group of institutional investors that were set up by the Chinese government during the stock market rout in 2H15 (Figure 1). The team mobilized some Rmb2tr to purchase stocks and ETFs in a bid to stabilize the A-share market after a rapid and deep correction.

As the A-share market stabilized in September 2015, we estimate that by 3Q15, the National Team owned roughly 1,400 stocks with a total market cap of Rmb1.4tr, which accounted for 4.0% of the total A-share listed market cap.

Given this huge size, the National Team has since become an important participant of the A-share market.

Observing their trading patterns since 2H15, we notice that the National Team has been unwinding their A-share exposure gradually amid a market order restoration; by 1Q17, they held A-shares worth a total of Rmb1.1tr, representing 2.7% of the total A-share market cap, a notable decline from the 4% in 3Q15.

The National Team operates through 21 known entities, including:

? China Securities Finance Corp. (CSF)

? Central Huijin Investment

? Central Huijin Asset Management (wholly owned by Central Huijin Investment)

? Five mutual funds set by the CSF with Rmb200bn total initial investment

? Ten managed accounts entrusted with asset management companies

? Three wholly owned subsidiaries of the State Foreign Exchange Administration In July 2015, the National Team mobilized some Rmb2tr1 to stabilize the rapidly falling stock market. The rescue was done through:

? 1) Direct stock purchases by the CSF and Central Huijin Investment; China Equity Strategy

? 2) ETF and stock purchase by brokers』 principal trading desk;

? 3) Stock purchasing from mutual funds (or their asset management arms) with money entrusted by CSF.

By the end of 3Q15, the National Team held roughly 1,400 stocks with a total market cap of Rmb1.4tr, 4% of the total domestically-listed market cap of all A-shares at that time (Figure 2). Hence the size of the National Team made it a 「too big to be ignored」 participant in the market.

Over the past seven quarters the National Team has been gradually selling back their A-share holdings to the market amid gradual normalization of the Ashare market. Since Aug-16 the A-share market has been range-bound as the SHCOMP traded between 3,000 and 3,300. The National Team』s holdings steadily declined to 2.7% in 4Q16-1Q17 from 4.0% originally (Figure 3).

Similarly, the five mutual funds set up by the CSF, have seen their aggregate equity exposure reduced to 40% in 1Q17 from 75% in 3Q15 (Figure 4). Of the Rmb1.1tr market cap currently owned by the National Team, 81% belongs to government-backed entities, including the CSF, Huijin & Huijin AM and SAFE』s subsidiaries, with the rest owned and managed by entrusted mutual funds and their asset management arms.

Q2: What A-share positions do they hold?

Except for five mutual funds that release holdings information on a quarterly basis, the remaining members of the National Team do not really disclose their holdings in detail. We tried to dig up the top-10 shareholder list of listed Ashare companies instead, which is disclosed in their quarterly results. As of 1Q17 and excluding Central Huijin Investment』s original holdings before 2Q15, we found that:

? The National Team held Rmb424bn market cap in financials, of which banks, brokers and insurance each accounted for Rmb267bn, Rmb80bn and Rmb77bn (Figure 5). The financial sector as a whole took up 40% of the National Team』s portfolio (Figure 6), quite high when compared to either financials』 35% weight in CSI300 or 20% weight in the entire A-share market.

Among CSI300 constituents, the most 「over-weighted」 sectors by the National Team are banks (+12.7ppt above benchmark weight), insurance (+3.6ppt) and energy (+3.1ppt). Telecom (+0.9ppt) and industrials (+0.6ppt) are slightly over-weighted. Major cyclicals such as IT (-5.7ppt), discretionary (-4.5ppt) and real estate (-3.0ppt) are mostly underweighted (Figure 7).

? In terms of position concentration, telecom has the highest concentration with National Team holdings accounting for 15% of the sector』s A-share free-float market cap. Next in line are financials with the National Team owning 14.7% of the free-float market cap of insurance and banks, in addition to 8.0% of brokers. Nearly 12% of CSI300 energy stocks』 free-float market cap was owned by the National Team, not a surprise given the National Team』s large-cap preference (Figure 8).

In terms of holdings distribution by company size, more than half of the National Team』s holdings are concentrated on mega-caps (>Rmb500bn A-share market cap) and large-caps (Rmb100~500bn).

Small-caps (Rmb10~50bn) make up 21%, followed by mid-caps (Rmb50~100bn, 10%) and micro-caps (

Looking at how much of the segment』s free-float market cap is owned by the National Team, mega- and large-caps rank as the two highest, with 12.5% and 10.1% of their free-float market cap held by the National Team, but these ratios have been steadily decreasing (Figure 10).

Looking at the National Team』s aggregate position in major indices, it owned 4.9% of the market cap of SSE50 as of 3Q15, and the ratio fell to 4.4% by 1Q17, yet the SSE50 remained the most heavily owned index, followed by CSI300 (3.8%), Shanghai A-shares (3.4%), SZ Component (1.8%) and ChiNext (1.1%), see Figure 11. Though the National Team』s holdings were 13.6% and 9.1% of the free-float market cap of SSE50 and CSI300 (as of 1Q17), its positions have notably declined from previous levels (Figure 12). This means that the National Team, while remaining an influential participant in the market, has been gradually withdrawing as the market restored order.

the National Team』s market trading operations in the past few quarters, we find that they tend to behave more like a stabilizer of market trends, i.e. they sell on strength and buy on dips. More specifically:

? Benchmarking A-share sector quarterly return against National Team』s position changes in that same quarter, we notice that they exhibit a clearly negative relationship (Figure 13), i.e. when a sector recorded a loss in the quarter, the National Team generally reported higher positions in that sector, while they usually reduced positions in a sector that delivered good share price returns.

? We saw a similar pattern in single stocks as well. In Figure 14, the median relative return (against the weighted average return of all Ashares) has no significant linear relationship with the National Team』s position changes. In fact, when the National Team sold its holdings, the median relative return of those stocks tended to be positive.

Similarly negative median relative return was more frequently associated with National Team buying.

In addition, looking at the top 10 stocks of National Team』s additional buying/selling in 1Q17 in both dollar and share volume terms, we found that the most heavily sold stocks were outperformers, while those that received additional purchases tended to be underperformers (Figure 15). For example, the National Team sold c.Rmb2.4bn or 2.1% outstanding of Gree Electric in 1Q17, yet the stock rallied 29% in the quarter. Also the National Team sold nearly 5% outstanding shares of Chuantou Energy in the public market, while the stock returned 34% in 1Q17. The top-10 stocks bought by the National Team, on the other hand, averaged only 1% return in 1Q17, in sharp contrast with the 16% return of the top-10 stocks sold. This

again suggests that the National Team has been acting as a market stabilizer by selling winners and buying laggards, rather than a relentless buyer aiming to boost overall equity prices.