Recent Overseas Active and Passive Funds Both Flow into Chinese Stock Market ——Global Asset Allocation Weekly Focus (20250822-20250829)

Investment Highlights:

This week (20250822-20250830), driven by strong momentum, Chinese equity assets continued to rise, with technology growth stocks particularly active. ChiNext and CSI 300 led global stock market gains. On August 28, the EU indicated it has drafted regulatory provisions proposing to eliminate all tariffs on US industrial products and grant preferential treatment to some US agricultural and seafood products. This move aims to secure US tariff reductions on EU automotive and auto parts, leading to notable declines in European stock markets this week. 1) Fixed income: 10Y US Treasury yield declined 3bps to 4.23%, while the US dollar index rose slightly to 97.8, remaining below 100; 2) Equity: Chinese stock markets continued strengthening this week, with ChiNext and CSI 300 leading global markets, rising 7.7% and 2.7% respectively; 3) Commodities: Most commodity assets rose this week, with Brent crude oil up 0.6% and gold up 2.9%.

As of 2025/8/28, over the past week, overseas active and passive funds, as well as domestic and foreign capital, all flowed into Chinese stock markets. For overseas funds, active funds recorded inflows of $283 million over the past week, while passive funds saw inflows of $1.058 billion. For domestic and foreign capital, domestic funds recorded inflows of $1.934 billion, while foreign capital recorded inflows of $1.341 billion over the past week. Globally, significant capital flows entered developed market equities over the past week. For fixed income funds, the US saw notable inflows of $14.12 billion this week. For equity funds, the US and Chinese stock markets experienced significant inflows of $9.95 billion and $3.27 billion respectively. Over the past week, US stock funds flowed into financials, technology, and industrials, while outflowing from energy, real estate, and consumer sectors. Chinese stock funds flowed into financials, materials, and consumer sectors, while outflowing from infrastructure and technology.

Regarding global valuation cost-effectiveness, A-share indices' ERP all declined this week. As of 2025/8/29, from a P/E percentile perspective, European and US stock markets show high valuations, with S&P 500 and German DAX P/E percentiles at 92.2% and 91.5% of their 10-year ranges respectively. The Shanghai Composite Index, Hang Seng China Enterprises Index, and Hang Seng Index P/E percentiles have recovered above 50%, but absolute valuation levels still lag behind Europe and the US. From an ERP perspective, Brazil's Bovespa, CSI 300, and Shanghai Composite Index ERP percentiles remain relatively high. From a stock-bond cost-effectiveness standpoint, Chinese stock markets still offer good allocation value compared globally. As of 2025/8/29, the S&P 500's risk-adjusted return percentile decreased from 45% to 44%, remaining relatively stable. CSI 300's risk-adjusted return percentile dropped from 85% to 75%, showing significant decline. Both developed and emerging markets' risk-adjusted return historical percentiles declined, from 59% to 57% and 79% to 78% respectively. For the GSCI commodity index, excluding agriculture, all other commodity categories' risk-adjusted return historical percentiles increased.

Global Asset Risk Warning Indicators: For US stocks, at the index level, the S&P 500 closed at 6460.26 this week, above its 20-day moving average, with implied volatility showing oscillating trends. For options put-call ratios, as of August 29, the S&P 500 put-call ratio was 0.92, compared to 1.16 on August 25. The declining put-call ratio indicates optimistic market sentiment and reduced hedging demand. For A-shares, markets rose significantly with optimistic sentiment. CSI 300 constituent stocks have recently pulled back, with less than 50% of constituents above their 5-day moving averages, but the proportion above 10-day, 15-day, and 20-day moving averages increases progressively, with over 70% of constituents still above their 20-day moving averages, indicating CSI 300's overall momentum trend continues. For options positioning, CSI 300 September expiry call option open interest above 4200 points showed significant decreases compared to last week, suggesting cautious sentiment in options markets and reduced high-strike call positions. For implied volatility, compared to last week, CSI 300 options across all strikes showed unidirectional upward structure with higher overall volatility levels. Despite declining high-strike call positions, current volatility pricing suggests more optimistic CSI 300 options volatility pricing this week.

Global Economic Data: US Economy: US July manufacturing PMI weakened marginally, unemployment rate rose to 4.2%, US core PCE year-over-year strengthened marginally as expected, with tariff impacts on US prices gradually materializing. Chinese Economy: July import-export data showed resilience, core CPI stabilized but PPI remained weak, industrial value-added growth slightly below expectations, real estate investment growth continued marginal decline. Industrial enterprise profits declined 1.7% year-over-year in July, showing marginal improvement. Fed Rate Cut Expectations: As of 2025/8/30, September rate cut probability at 86.40%, slightly up from last week's 84.70%; October rate cut to 3.75%-4.00% probability at 48.00%, up from last week's 43.50%. Key economic indicators next week: US July durable goods orders and August PMI.

Risk Warning: Short-term asset price fluctuations may not represent long-term trends; European and US economies may experience deeper than expected recession; significant policy direction changes during Trump's presidency.