ETF margin and short-selling balance continues to grow; leveraged funds are "both offensive and defensive."

◎Reporter Hu Yao, Chen Yue

Since June, trading activity in A-shares has continued to pick up, and financing funds have accelerated their participation in the market by channeling through ETFs. According to data from Wind, as of June 30, the combined margin-trading balance of ETFs on the Shanghai and Shenzhen exchanges was 116.088 billion yuan, up 5.2588 billion yuan from the end of May. Among them, theme ETFs focused on semiconductors and communications have become key targets for financing funds to add holdings. However, the financing balance of gold ETFs remains the top one, indicating that while leveraged funds are actively laying out growth opportunities, they still maintain a certain allocation to defensive positions.

Industry insiders believe that the continuous growth in ETF financing balances reflects, on the one hand, that market risk appetite has risen further; on the other hand, it also shows that funds are more willing to use ETFs for thematic allocation and risk diversification. With the semi-annual performance verification window approaching, financing funds are likely to continue positioning around technology-growth directions with stronger performance certainty, while also balancing defensive assets such as “bonuses” and gold, to achieve a well-balanced portfolio allocation.

Technology themes favored by financing top-ups

According to Wind data, as of June 30, the combined margin-trading balance of ETFs on the Shanghai and Shenzhen exchanges reached 116.088 billion yuan, up 5.2588 billion yuan from the end of May, representing a month-on-month increase of 4.74%. Of this: the ETF financing balance was 106.189 billion yuan, up 4.424 billion yuan from the end of May; the ETF securities lending/short-selling balance was 9.899 billion yuan, up 0.834 billion yuan from the end of May.

In terms of existing scale, gold ETFs are still the category with the largest allocation by financing funds. The financing balance of Huaan Gold ETF reached 6.136 billion yuan, ranking first in the market; the financing balances of Guotai CSI All Share Securities Company ETF and E Fund Gold ETF were 3.847 billion yuan and 3.637 billion yuan, respectively.

However, in terms of the incremental directions of financing funds in June, funds clearly tilted toward technology growth. Many technology-themed ETFs saw their financing balances rise in the leading positions, reflecting that financing funds increasingly prefer sub-sectors with higher levels of business conditions and clearer industry trends.

Specifically, among 21 ETFs whose financing balance increments exceeded 100 million yuan, the financing balances of Guotai CSI Semiconductor Materials and Equipment Theme ETF, Guotai CSI All Share Communications Equipment Theme ETF, and Huaxia SSE STAR Market Semiconductor Materials and Equipment Theme ETF increased by 1.453 billion yuan, 0.896 billion yuan, and 0.709 billion yuan, respectively. Semiconductor equipment and communications directions in the AI industry chain have become key areas where financing funds are adding positions.

Funds increasingly value performance certainty

Institutional sources believe that the sustained growth in ETF financing balances reflects that market risk appetite has improved compared with earlier periods. At the same time, the thinking behind capital allocation is shifting from simply chasing themes to taking both business conditions (prosperity) and the ability to deliver performance into account.

Yang Gang, chief economist at Eag­le Fund, analyzed that the prosperity of the current AI supercycle is still spreading further. In the industrial chain, order and profit-realization capabilities in segments such as semiconductors and computing power are relatively more prominent; therefore, funds continue to concentrate on sub-directions such as semiconductor equipment, materials, and computing power, which in turn boosts market risk appetite. As the window for disclosing semi-annual reports approaches, market attention is expected to gradually shift from theme catalysts to performance verification. Within the technology sector, further differentiation is expected, and funds are more likely to favor sub-sectors that have order support and strong profit-realization capabilities.

Zeng Zebang, fund manager at Zhiling Sanlian Private Fund, said that financing funds are still highly concentrated in AI hardware tracks such as electronics, communications, and semiconductors, and the market shows clear structural characteristics. However, with the manufacturing PMI returning to an expansion range and with marginal improvements in the fundamentals of some undervalued sectors, the market is expected to evolve from the divergence seen in the first half of the year toward a gradual transition into rebalancing. In this process, besides the technology main line, sectors such as brokerages, consumer, pharmaceuticals, and some energy sectors are also expected to see funds revisit them.

“ETFs have the characteristics of covering industries, dispersing risk, and having good liquidity, making them an important tool for financing funds to participate in thematic investing. Judging from the flow of financing funds in this round, on the one hand, funds continue to add positions in high-prosperity technology directions such as semiconductors and communications; on the other hand, the financing balance of gold ETFs has always remained the market leader. This reflects that funds adopt a ‘growth + defense’ allocation approach—while actively seizing opportunities in the industry, they hedge risks from market volatility with assets such as gold,” a private fund investment manager in Shanghai said.

Looking ahead, multiple institutional sources believe that as listed companies disclose their semi-annual reports one after another, financing funds may place even more emphasis on profit realization capability and the sustainability of business conditions. Technology growth is expected to become the main line for the medium term, but funds will focus more on sub-sectors with higher performance certainty and relatively reasonable valuations. Meanwhile, defensive assets such as high-dividend strategies and gold are still expected to receive some allocation, helping play a role in stabilizing portfolio returns amid market volatility.

(Editor: Xu Nannan)

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