Explosive ETF Dominates Market

Recently, the entire industry has been watching the off-exchange issuance battle of 20 CSI A500 index funds with keen interest.

How intense is the scene?

Last Friday, as soon as they went on sale at 9:30 a.m., the CSI A500 off-exchange funds, led by the Southern CSI A500 ETF Connection (Class A: 022434, Class C: 022435), sold 2.5 billion yuan, exceeded 10 billion yuan in sales within two hours, and sold over 20 billion yuan on the first day...

Suddenly, my perception of hundred million has become a bit blurred, as if I spent a hundred yuan, it was spent lightly and effortlessly.

That's not all!

Not to mention that the 10 CSI A500 ETFs, led by the Southern CSI A500 ETF (159352), have seen a crazy influx of net subscriptions after listing on October 15th, doubling in size in just 7 days.

Don't forget, there are more than 40 CSI A500 index funds that were approved in a flash, which means there will be another issuance battle to look forward to.

Why are these funds so keen on the CSI A500 index?

The CSI A500 has become a hit index with unique advantages.

It is not only the first major broad-based index after the release of the new "Nine National Articles," the third larger and broader index in the CSI A series, but also possibly the last major broad-based index.The CSI A500 adopts the most advanced index compilation method, with 500 constituent stocks covering all 92 of the CSI's third-level industries, and a higher proportion of leading companies in new quality productive forces, making it more growth-oriented.

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In addition, the index incorporates ESG and interconnectivity conditions in the sample screening process, which aligns more with the investment aesthetics of foreign capital and is expected to become an important channel for international investors to allocate Chinese assets.

Looking back at historical performance, the advantages of the CSI A500 index are clear, with a cumulative increase of 369% since its base date, outperforming the Shanghai Composite Index, CSI 300, and CSI 800 during the same period.

The index is undoubtedly a good one, but the key is to determine which wave you are in on that curve.

The market since September 24 has well illustrated the intense emotional shift of Mr. Market, with no time to react.

Suddenly, a crazy bull market arrived, with the market surging 1000 points in six days, making investments as easy as picking up money. Unfortunately, the pullback after the National Day holiday was also fierce, with a 30-point pullback in a week being a common occurrence.

ETFs have become the sharpest spear in this crazy market because this tool has always been in a state of being fully invested.

However, this is not the main reason why ETFs are favored.

The most critical reason why investment veterans like Warren Buffett have always been optimistic about index funds is that ETFs invest in a basket of stocks, with risks sufficiently diversified.In reality, under the recent fervor, the market has even seen the rare phenomenon of a rush for ETFs, with the "20CM" ETF not being enough, and inquiries about whether there are any Beijing Stock Exchange ETFs...

ETFs are indeed tools suitable for most people, but they need to be paired with a long-term fixed investment approach.

Most people are well aware of the 80/20 rule in the stock market, and almost everyone has heard of the smile curve theory, but how many people actually put it into practice?

People admire Buffett, but in fact, there is no mysterious secret weapon in Buffett's investment method; it is all based on very simple principles. The only difficult part is to go against human nature.

Recently, while reading this year's second-quarter fund reports, it was no exception that they all mentioned funds pouring into the bond market and dividend sectors.

Seeing fund managers say this is the most painful moment in their careers might mean the appearance of a style turning point, but I dare not pin my hopes on this.

Suddenly, I feel very emotional; timing investments is really difficult.

In that case, there is no need to complicate things artificially. Instead, let's all be patient and leave the answers to time.

Relevant research shows that from a long-term perspective of more than ten years, stocks have outperformed all other major asset classes. However, in pursuit of higher returns from stocks, one must correspondingly bear higher volatility.Regarding the selection of ETF products, you will find that almost all market materials suggest choosing those with a large scale. This refers not only to the scale of the index fund itself but also has a close relationship with the platform of the fund company.

When the first batch of 10 CSI A500 ETFs were established, it coincided with the most volatile period of the A-share market on September 24th. The net value of CSI A500 ETF Nanfang (159352) on the day before its listing on October 15th was 1.0005, making it one of the only two fund companies in the same category that managed to achieve a net value above 1. As of October 25th, the return since its establishment was positive, again making it one of the only two fund companies in the same category to achieve this.

Why has Nanfang Fund been able to achieve this?

The most important aspect of ETF product management is the precision of tracking, which is closely related to the fund company's own quantitative investment research capabilities and fund investment management systems. Particularly, the more constituent stocks of the index being tracked, the higher the requirements for the platform's capabilities.

As a veteran ETF operator, Nanfang Fund has been ranked first in the tracking accuracy of its stock ETFs over the past decade (data as of March 31, 2024).

CSI 500 ETF (510500) and CSI 1000 ETF (512100) are currently the largest in their respective categories. The former has grown into a behemoth with a scale of over 100 billion, achieving an excess return of over 20% since its establishment 11 years ago. The latter has a scale exceeding 60 billion.

Thanks to Nanfang Fund's operational experience with indices such as CSI 500 and CSI 1000, it provides a certain guarantee for the stable operation of CSI A500 ETF Nanfang (159352) and its linked fund, Nanfang CSI A500 ETF Link (Class A: 022434, Class C: 022435).

There are still many significant events that have not yet been resolved, and the market's fluctuations in the future will not be small. I hope everyone can maintain a stable mindset, invest in what they understand, remain humble and patient, and wait for the flowers to bloom.