Huatai Securities: Currently, funds are still actively seeking "certainty" amid energy shocks

A research report from Haitong Securities notes that after the market adjusted last week, it saw a modest rebound. However, due to disturbances from overseas risks, trading-type capital has been relatively cautious in its participation, showing a divergence between the market’s “money-making” effect and investor sentiment. Specifically, measured by the advance-decline index, the market’s money-making effect had already been repaired to around the position of March 19 by the end of last week. But net outflows of margin financing funds widened to 24 billion yuan, and market activity fell to below 9%, marking the first time since July 2025. With the market concerned that continued net outflows alongside shrinking turnover may give rise to liquidity risks, we believe: 1) the market’s money-making effect is still present; the average collateral coverage ratio for margin financing is relatively stable, so the probability of negative feedback occurring downward is low; 2) capital is still actively seeking “certainty” amid the energy shock. Consensus is accelerating toward an energy substitution logic, and both indicate that while capital is maintaining overall defense, it still has a strong willingness to go long structurally.

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Haitong | Strategy: Seeking certainty in defense

After the market adjusted last week, it saw a modest rebound. However, due to disturbances from overseas risks, trading-type capital has been relatively cautious in its participation, showing a divergence between the market’s “money-making” effect and investor sentiment. Specifically, measured by the advance-decline index, the market’s money-making effect had already been repaired to around the position of March 19 by the end of last week, but net outflows of margin financing funds widened to 24 billion yuan, and market activity fell to below 9%, marking the first time since July 2025. With the market concerned that continued net outflows alongside shrinking turnover may give rise to liquidity risks, we believe: 1) the market’s money-making effect is still present; the average collateral coverage ratio for margin financing is relatively stable, so the probability of negative feedback occurring downward is low; 2) capital is still actively seeking “certainty” amid the energy shock. Consensus is accelerating toward an energy substitution logic, and both indicate that while capital is maintaining overall defense, it still has a strong willingness to go long structurally.

Key takeaways

Point 1: Trading-type capital is relatively cautious

After a sharp selloff on Monday last week, the market saw a modest rebound. Yet trading-type capital remains cautious. Specifically, measured by the advance-decline index, the market’s money-making effect, after falling back to a temporary low on last Monday, had already been repaired to around the position of March 19 by the end of last week. Meanwhile, in terms of capital sentiment, the A-share sentiment index we observed has continued to stay in the panic zone. Margin financing funds saw net outflows of 24 billion yuan last week, with net outflows widening versus the prior period’s net outflows; financing activity also narrowed in tandem to below 9%, the first time since July 2025. Whether this money-making effect and the divergence with sentiment is, at its core, also impacted by overseas risk disturbances—regardless, the willingness for a large inflow of funds remains relatively low. In addition, regarding the market’s concern about whether continued fund outflows will subsequently lead to liquidity risks, we believe: 1) the market’s money-making effect is still present; 2) the average collateral coverage ratio for financing is relatively stable, so the probability of negative feedback occurring downward is low.

Point 2: Capital is seeking certainty amid the energy shock

Unlike what was described last week—capital seeking defensive directions during the decline—this week capital is seeking more “certainty” amid the shock. And consensus has formed relatively strongly in the direction of an energy substitution logic: 1) the ratio of total buy and sell turnover on the Dragon and Tiger lists to total A-share turnover has continued to decline, but the proportions of sectors such as power and utilities, and new energy/“electricity-related new” (电新) have continued to rise; 2) mutual funds have increased their positions in lithium batteries and power-related sectors; 3) trading-type funds such as margin financing also show relatively high attention to the substitution logic brought about by the shock, and funds are being added to utilities.

A snapshot of marginal changes across different types of capital

Retail investors: Last week, retail investors saw net inflows of 3.751 billion yuan. Net inflows went to sectors such as electronics, national defense and military industry, and non-bank financials, while net outflows went to directions such as power equipment, non-ferrous metals, and machinery equipment;

Leverage-type capital: Last week, margin financing funds recorded outflows of 24.006 billion yuan, and financing trading activity fell back to 8.94%. The market’s average collateral coverage ratio declined slightly month-over-month to 275.54%. Structurally, margin financing funds recorded net inflows into sectors such as power and utilities, coal and communication, while they recorded net outflows from sectors such as computer, national defense and military industry, and automobiles;

Mutual funds & ETFs: Last week, the number of fund reporting/submission meetings rose month-over-month, mainly for hybrid funds and ETF funds. The equity allocation of ordinary-type and equity-focused funds fell slightly, while the strength of new issuance rose slightly. Last week, ETF funds saw net outflows of 12.253 billion yuan, of which broad-based ETFs saw net outflows of 0.769 billion yuan. Looking by sub-sector, net inflow sizes led in high-end manufacturing and public services sectors; among industries, net inflows ranked higher in sectors such as power equipment and new energy, power and utilities, and coal;

Foreign capital: In allocation-type foreign capital as tracked by EPFR, from March 18 to March 25, allocation-type foreign capital saw net inflows of 5.04 billion yuan. Active allocation-type foreign capital saw outflows of 0.63 billion yuan, while passive allocation-type foreign capital saw net inflows of 5.66 billion yuan.

Risk warning: 1) the estimated portfolio-holding model fails; 2) the data statistics reporting criteria are incorrect.

（Source: Jiemian News）