I believe that people engaged in stock trading and financial investment should be familiar with the term northbound capital, but people who have never known this area should rarely hear of this term, so what does it mean? Let's talk about the meaning of northbound funds first.
Details 0 1 Although the northbound capital accounts for a small proportion in the whole A-share market, it has an obvious leading role in the trend of A-share prices. Many times of accurate bargain-hunting won it the title of "smart money", and the fluctuation of market sentiment was gradually affected by the flow of funds northward. More and more people choose "northbound capital" as one of the important reference indicators for investment decision-making.
Northbound capital is commonly known as hot money, because Chinese mainland's capital flow is controlled, not free, but Hong Kong's capital flow is free. During the period of RMB appreciation, many Hong Kong and international funds will enter the mainland through various abnormal channels to gain the benefits of RMB appreciation. Generally speaking, the northward capital mentioned in the stock market refers to the northward capital going to Shenzhen and Shanghai to buy stocks. Similarly, southbound funds refer to Shanghai and Shenzhen going to Hong Kong. Buying means buying more than selling, and selling means selling more than buying.
Among the channels through which foreign capital can invest in A-shares, northbound capital accounts for the largest proportion and is the most representative. Foreign capital entering A-shares can be achieved through Shanghai-Shenzhen-Hong Kong Stock Connect, QFII (Qualified Foreign Institutional Investors) and RQFII (Qualified Foreign Institutional Investors in RMB). By the end of 20 19, all foreign investors have owned nearly 70% of the capital in the north, with QFII and RQFII accounting for about 30%. At present, the market value of northbound capital holding shares accounts for nearly 3% of the total market value of A-share circulation, and it is rising steadily. In addition, because the purchase through Shanghai-Shenzhen-Hong Kong Stock Connect does not require approval, there is no quota limit, and the information is publicly disclosed, northbound capital has become one of the most important indicators to observe the participation of foreign capital in China's capital market.
Northbound funds are incremental funds of A shares, which can obviously affect the trend of A shares. According to the types of funds going northward, we can analyze its impact as follows:
Allocated funds
Configuration funds mainly track international indexes, such as MSCI index and Russell index.
hedge fund
There are several spreads between Shanghai and Shenzhen stock markets and Hong Kong stocks: the spread between individual stocks, the spread between indexes and the spread between exchange rates.
(1) The spread between individual stocks refers to the spread caused by the fact that the share prices of listed companies listed on both A shares and Hong Kong shares are not necessarily the same.
② Inter-index spread refers to the spread between domestic stock index futures and overseas A-share futures (FTSE A50).
(3) The exchange rate spread refers to the spread between the fluctuation of the exchange rate between Hong Kong dollars and RMB, and the spread between the onshore RMB exchange rate and the offshore RMB exchange rate.
The difference of these factors makes it possible for arbitrage space to appear in the trading process, so arbitrage funds will go north or withdraw to make profits.