On August 18, the A-share market showed strong momentum, with the Shanghai Composite Index reaching an intraday high of 3,745.94 points, marking its highest level in nearly a decade.
Institutional analysts believe that ample liquidity is the core driver behind the index's upward movement.
Fullgoal Fund noted that leveraged funds have sustained the market's bullish trend, with margin financing balances continuing to rise even after surpassing the 2 trillion yuan threshold, indicating sustained market activity. Beyond margin trading, the phenomenon of "household deposit migration" is also evident—data shows that household deposits fell by 1.11 trillion yuan in July, a steeper decline of 0.78 trillion yuan year-on-year, while deposits in non-bank financial institutions increased by 2.14 trillion yuan, up 1.39 trillion yuan year-on-year. This suggests that some savings may be flowing into the capital market through funds, stocks, and other channels.
As a key avenue for capital inflows, the trading volume of equity ETFs has surged, returning to levels last seen in early April. Specifically, between April 7 and 10, equity ETF trading volumes exceeded 100 billion yuan for four consecutive trading days before retreating. Since July 22, trading activity has picked up again, with daily turnover repeatedly surpassing 100 billion yuan. On August 18, equity ETF trading volume reached 145.454 billion yuan, the highest since April 7 and 8 this year.
Looking at the ownership structure of newly issued ETFs, retail investors frequently appear among the top ten holders. For example, as of August 14, nine of the top ten holders of E Fund’s ChiNext 50 ETF were individual investors. Similarly, seven of the top ten holders of Southern Fund’s CSI General Aviation Theme ETF were retail investors.
Foreign and insurance capital are also potential incremental funding sources that cannot be ignored, with both showing increased activity recently. Huatai Securities research reports indicate growing foreign interest in Chinese assets. Specifically: Since July, trading volumes via Stock Connect programs have accelerated; this year, foreign strategic investors’ participation in Hong Kong IPOs hit a five-year high. However, data from EPFR shows that overseas mutual funds have not yet seen a sustained net inflow into A-shares. As of August 13, overseas passive funds recorded a net inflow of $300 million over the past week, while active funds saw a slight net outflow of $30 million.
Regarding insurance capital, Huatai Securities reports that as of Q1, insurers’ stock investment ratio rose by 0.8 percentage points to 8.4% this year. With the advancement of long-term investment reforms for insurance funds and policies strengthening insurers’ long-term performance assessments, their stock investments may become more aggressive, as seen in recent frequent stake acquisitions.
