On July 22nd, China's A-share market experienced another day of net capital outflows from equity ETFs, exceeding 21.3 billion yuan. Despite mixed performance across the major indices, certain thematic ETFs focused on semiconductors, integrated circuits, and power managed to attract significant inflows.

The Shanghai Composite Index edged up 0.07%, while the Shenzhen Component Index fell 1.42% and the ChiNext Index dropped 3.23%. Sectors like precious metals, coal mining, and petroleum & petrochemicals led the gains.

Overall ETF Market Flows

The broader market for equity ETFs, including cross-border products, witnessed a net outflow of 21.37 billion yuan. The top five sectors by net outflow were the CSI 1000 Index (10.7 billion yuan), CSI 500 Index (3.83 billion yuan), Communications (3.18 billion yuan), STAR 50 Index (2.68 billion yuan), and CSI 300 Index (1.67 billion yuan). Conversely, the leading sectors for net inflows were Gold (2.53 billion yuan), CSI A500 Index (1.04 billion yuan), Power (810 million yuan), Credit Bonds (760 million yuan), and Securities (650 million yuan).

Looking at a five-day trend, recent data shows substantial capital inflows into the CSI 300 Index, exceeding 43.5 billion yuan, and into the STAR 50 Index, surpassing 25.3 billion yuan.

Major Fund Company Activity

Among leading asset managers, E Fund Management reported its ETF assets under management at approximately 613.72 billion yuan. Key products like its STAR Market and ChiNext ETF saw a net inflow of 260 million yuan, bringing its size to 17.06 billion yuan. Its CSI A500 ETF attracted 250 million yuan in net inflows, reaching 26.56 billion yuan. Other products, including its Securities & Insurance ETF, Cloud Computing ETF, and CSI 300 ETF, also recorded net inflows ranging from 90 million to 140 million yuan.

At China Asset Management, notable net inflows from the previous trading session were seen in its STAR Semiconductor ETF and its Power Grid Equipment ETF, drawing in 2.965 billion yuan and 193 million yuan respectively. Their latest sizes stand at 33.175 billion yuan and 17.447 billion yuan. Several other ChinaAMC ETFs, including those tracking credit bonds, free cash flow, the CSI A500 index, gaming, and gold, each recorded net inflows above 100 million yuan.

Sectors Attracting Capital

Thematic ETFs were the primary destinations for incoming capital. Major net inflows were concentrated in products like ChinaAMC's STAR Semiconductor ETF, Penghua's STAR Semiconductor Equipment ETF, Harvest Fund's Integrated Circuit ETF, GF Fund's Power ETF, and Huatai-PineBridge's STAR Semiconductor Equipment ETF.

Market Outlook from Fund Houses

Industrial Fund Management expressed an optimistic view, noting that the rapid technological iteration and application expansion within the AI industry continue, providing solid fundamental support for the tech sector's momentum. With risks associated with Federal Reserve rate hikes receding, the medium-term uptrend for A-shares is expected to persist against a backdrop of positive tech industry trends and easing global liquidity tightening risks. The firm suggests the tech sector may continue to consolidate around large-cap leaders, while also highlighting opportunities in undervalued areas like non-bank financials, pharmaceuticals, and export-related chains.

Bank of China Fund Management indicated that the A-share market has undergone a relatively full adjustment and is poised for a stabilization and rebound, recommending active attention to the third-quarter performance. As the profit effect in the tech sector diminishes, market style is expected to become more balanced, potentially broadening profit opportunities in any subsequent recovery. Regarding the AI industry chain, the firm advises: first, focusing on overseas AI computing companies with strong earnings visibility and reasonable valuations as the sector enters an earnings digestion phase; second, being optimistic about the growth potential of the domestic computing industry chain, particularly driven by structural demand from models like Kimi K3 and the growth prospects of domestic chips; and third, seeking investment opportunities in the domestic semiconductor industry during market dips.

For non-AI sectors, the firm recommends attention to areas benefiting from AI industry investment demand and expectations of declining real interest rates. These include resource commodities with constrained supply and demand driven by new industries (e.g., industrial metals, energy metals, some chemical products), investment opportunities in power and grid facility upgrades, and allocation assets such as innovative drugs, precious metals, non-bank financials, and coal.