A-share equity ETFs have recently faced eight consecutive weeks of capital outflow pressure, with continued divestment by state-backed investors known as the National Team identified as a key factor. However, latest market dynamics suggest this wave of large-scale selling may be winding down. Data indicates that funds led by Central Huijin Investment Ltd. have cumulatively sold approximately 170 billion U.S. dollars worth of ETFs tracking Chinese securities this year, equivalent to over 1.16 trillion yuan, representing roughly three-quarters of their holdings at the beginning of the year. Even following early April, the divestment intensity remained robust, involving amounts around 30 billion U.S. dollars.
Clues can be gleaned from periodic fund reports. The Q1 financial statements reveal that Central Huijin's shareholding in CSI 300 ETFs under major fund management companies has fallen below the 20 percent mandatory disclosure threshold, whereas it remained around 40 percent at the end of the previous quarter. This de-stocking trend appears widespread; even in products like the Huaan SSE 180 ETF, where Huijin previously held significant stakes, the latest shareholder lists show no single shareholder exceeds 20 percent. Market analysts believe this move aims to cool the overheated market conditions earlier in the year and steer market momentum from a rapid surge toward a stable slow-bull pattern. Some views suggest the National Team's overall intention may be to reduce holdings by approximately 90 percent, keeping ratios below information disclosure thresholds to avoid frequent prominence in first-half filing documents.
Although selling persists, future pressure is expected to gradually ease. Based on the benchmark of reducing holdings by 90 percent, the entire exit process is estimated to require a few more weeks. Considering ETFs have seen significant net outflows for multiple consecutive weeks, the current phase may mark the final stage. As official holdings drop to low levels, market liquidity has not dried up; instead, a transition between old and new capital is evident. Risk-seeking leveraged funds remain enthusiastic, with A-share financing balances surpassing 2.88 trillion yuan in late May, setting a historic high and indicating ongoing bullish sentiment. Meanwhile, foreign capital returned to the A-share market in April, achieving monthly net inflows. Institutional commentators note that ETF redemptions have not caused significant shock to the overall market, as spontaneous institutional and retail capital are absorbing liquidity. The current situation indicates a transition from policy-driven unconventional stability maintenance to market-driven normal operations, with subsequent trends depending largely on corporate fundamentals and the interplay among various spontaneous funds.
