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

Huatai Securities’ research report states that last week, after the market adjusted, it saw a modest rebound. However, due to disruptions from overseas risks, trading-type funds were more cautious, showing a divergence between the market’s money-making effect and investor sentiment. Specifically, measured by the T+L up/down 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 expanded to 24 billion yuan, and trading activity fell below 9%, the first time since July 2025. With the market concerned that ongoing fund outflows amid share shrinkage could lead to liquidity risk, we believe: 1) The market’s money-making effect still exists; and the average margin guarantee ratio is relatively stable, so the probability of a negative feedback occurring on the downside is low. 2) Currently, funds are still actively seeking “certainty” amid an energy shock. Consensus is accelerating toward an energy-substitution logic, both of which indicate that while funds remain defensive overall, they still retain a strong willingness to go long on a structural basis.

Full text as follows

Huatai | Strategy: Seek certainty while staying defensive

Last week, after the market corrected, it saw a modest rebound. However, due to disruptions from overseas risk, trading-type funds were cautious, showing a divergence between the market’s money-making effect and investor sentiment. Specifically, measured by the T+L up/down index, the market’s money-making effect, which fell back to a temporary low point on Monday last week, had already been repaired to around the position of March 19 by the end of last week. But in terms of funds’ sentiment, we observed that the A-share sentiment index remained in the panic range; margin financing had net outflows of 24 billion yuan last week, and the month-on-month net outflows were larger than in the prior period; financing activity also narrowed to below 9%, the first time since July 2025. Such a divergence between the money-making effect and sentiment is essentially, or may be, influenced by overseas risk disruptions. The willingness of funds to substantially enter the market is still relatively low. In addition, regarding the market’s concern that sustained fund outflows in the future could generate liquidity risk, we believe: 1) The market’s money-making effect is still present; 2) the average margin guarantee ratio is relatively stable, so the probability of negative feedback on the downside is low.

Key viewpoints

Focus 1: Trading-type funds are cautious

After a sharp drop on Monday last week, the market saw a modest rebound. However, trading-type funds are cautious. Specifically, measured by the T+L up/down index, the market’s money-making effect, after falling to a temporary low point on Monday last week, had already been repaired to around the position of March 19 by the end of last week. But on the sentiment side, the A-share sentiment index we observed remained continuously within the panic range. Margin financing saw net outflows of 24 billion yuan last week; compared with the prior period, net outflows increased somewhat; financing activity also narrowed in parallel to below 9%, the first time since July 2025. The divergence between this money-making effect and sentiment—whether fundamentally or in essence—may be affected by overseas risk disruptions. The willingness of funds to enter the market on a large scale is still low. In addition, regarding the market’s concern that sustained fund outflows may generate liquidity risk, we believe: 1) The market’s money-making effect still exists; 2) the average margin guarantee ratio is relatively stable, and the probability of negative feedback on the downside is low.

Focus 2: Funds seek certainty amid an energy shock

Unlike the funds seeking defensive directions during the decline described last week, this week funds are seeking more “certainty” amid the shock. And in the direction of the energy substitution logic, a relatively strong consensus has formed: 1) Although the ratio of total buy-and-sell turnover on the Dragon and Tiger list to total A-share trading turnover continues to decline, the share of sectors such as power and utilities, and electric new (electricity-related electronics), continues to rise. 2) Public funds have increased their positions in lithium batteries and power sectors. 3) Trading-type funds such as margin financing also show a high focus on the substitution logic brought about by the shock; utilities have received additional fund purchases.

A look at marginal changes across various types of funds

Retail funds: Last week, retail funds had net inflows of 3.751 billion yuan. Funds had net inflows into sectors including electronic devices, national defense and military-related industry, and non-bank financials, while they had net outflows from directions including power equipment, non-ferrous metals, and machinery equipment, etc.

Leverage funds: Last week, margin financing saw outflows of 24.006 billion yuan. Financing trading activity fell back to 8.94%. The market average margin guarantee ratio fell slightly month-on-month to 275.54%. Structurally, margin financing had net inflows into sectors such as power and utilities, coal and communications, while it had net outflows into sectors such as computer, national defense and military-related industry, and automobiles, etc.

Public funds & ETFs: Last week, the number of fund-raising meetings for various types of funds increased month-on-month, mainly in hybrid funds and ETFs. The equity allocation of ordinary funds and stock-biased funds fell slightly, while the intensity of new issuance rose slightly. Last week, ETF funds had net outflows of 12.253 billion yuan. Among them, broad-based ETF funds had net outflows of 0.769 billion yuan. By sector, the net inflow scale was at the top for high-end manufacturing and public services; within industries, net inflows were at the top for power equipment and new energy, power and utilities, and coal, etc.

Foreign capital: Among allocation-type foreign capital statistics by EPFR, from March 18 to March 25, allocation-type foreign capital had net inflows of 5.04 billion yuan. Among that, actively allocated foreign capital had outflows of 0.63 billion yuan, while passively allocated foreign capital had net inflows of 5.66 billion yuan.

Risk warning: 1) Estimated position-holding model fails; 2) data statistics methodology may be incorrect.

（Source: Jiemian News）