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China’s Social Security Fund Told To Buy Stocks

6 Min. Read Time

Key News

Asian equities were higher, except for Hong Kong and Mainland China, which were off following President Trump’s 10% tariff threat, which prompted profit-taking after six days of gains.

I would have thought that a 10% tariff was expected or would have been cheered, as 10% is better than 60%, which is why today’s market action could simply have been profit-taking. There was a fairly broad sell-off in both markets, less so because of Trump’s AI infrastructure effort called Stargate, which was cited for the outperformance of technology hardware and semiconductor stocks. CATL fell -2.34% after yesterday’s post-close financial result guidance, while New Oriental Education plunged by -24.20% on weak results. All of the growth stocks that outperformed yesterday underperformed today. Mainland investors bought the dip with $535 million of net buying.

The most important thing all day occurred after the close. It was announced that at 9 am tomorrow, a press conference titled “Implementation Plan for Promoting the Work of Entry of Long-Term Capital into the Market" will be held by the CSRC’s Governor Wu Qing, the Ministry of Finance, Ministry of Human Resources and Social Security, the PBOC, and State Administration of Financial Supervision. Topics to be discussed include:

  • Increase the proportion & stability of A-share investment of commercial insurance funds:
    • “guide large state-owned insurance companies to increase the investment scale and actual proportion of A-shares.”
  • Optimize the investment management mechanism of the National Social Security Fund & the basic pension fund:
    • “increase the proportion of equity assets invested in the national social security fund.”
  • Improve the market-oriented investment operation level of enterprise (job) industry pension fund:
    • “Gradually expand the coverage of enterprise pension. Support qualified employers in exploring the opening of individual investment options for enterprise pension.” 
  • Increase the scale and proportion of equity funds:
    • “guide and urge the public fund managers to steadily increase the scale and proportion of equity funds.”
  • Optimize the investment ecology of the capital market:
    • Guide listed companies to increase share buybacks and implement the Policy of multiple dividends a year. Promote listed companies to increase the use of share buy-back and increase the use of the loan tool.

I can read your mind. The National Social Security Fund (NSSF) has RMB 2.9 trillion (USD $396 billion) of assets under management as of year-end 2023, with approximately 14%/RMB 413 billion (USD $56 billion) invested in stocks. Today, the turnover in the Mainland market was RMB 1.129 trillion (USD $154 billion). It was interesting that the Shanghai and New York Stock Exchange’s value traded is almost the same at USD $64 billion. The limit on stocks in the NSSF is 40%, so you don't need me to do the math for you.

Also in the news was Central Huijin’s reporting of their active ETF positions as of the end of the year. They don’t give the value, so give me some time, though media reports noted an increase in several funds. For several of their favorite ETFs, Central Huijin holds 40% to 50% of shares outstanding, so I imagine the total is a big number (USD +$150 billion). It sounds eerily similar to what Japan did in 2010 to get the stock market going by buying ETFs. It took a few years, but the market bottomed in 2011/2012, with the Nikkei 225 up 381% since then. Coincidentally, Japan’s population peaked in 2011, so don’t give me this demographic time bomb narrative. Fast forward to today, and they are in the ETF market! Since then, as their largest shareholder, the BoJ has been reforming companies to make them more shareholder-friendly. Coincidentally, today, the CSRC reported that listed companies issued RMB 2.4 trillion (USD $328 billion) of dividends while buying back RMB 147.6 billion (USD $20 billion) of stock in 2024. Spooky!

The Hang Seng and Hang Seng Tech fell -1.63% and -2.40%, respectively, on volume down -8.56% from yesterday, which is 100% of the 1-year average. 94 stocks advanced, while 405 declined. Main Board short turnover decreased by -6.27% from yesterday, which is 117% of the 1-year average, as 18% of turnover was short turnover (Hong Kong short turnover includes ETF short volume, which is driven by market makers’ ETF hedging). Value and large capitalization stocks fell less than growth and small capitalization stocks. Healthcare was the only positive sector, up +0.18%, while consumer discretionary fell -3.43%, real estate fell -2.29, and consumer staples fell -2.09%. The top sub-sectors were consumer durables, semiconductors, and household products, while household products, consumer staples, and consumer discretionary were the worst performers. Southbound Stock Connect volumes were at 1.5X pre-stimulus levels as Mainland investors bought $535 million of Hong Kong stocks and ETFs, with SMIC a moderate/large net buy, ZTE, XPeng, Xiaomi, Tencent, and China Mobile a small net buy, Alibaba, Meituan and CNOOC a small net sell.

Shanghai, Shenzhen, and the STAR Board fell -0.89%, -0.99%, and -0.10%, respectively, on volume down -5.78% from yesterday, which is 105% of the 1-year average. 499 stocks advanced, while 4,037 declined. Value and small capitalization stocks “outperformed”/fell less than growth and large capitalization stocks. Technology stocks gained +0.94%, and material stocks gained +0.07%, as they were the only positive sectors, while real estate fell -3.28%, consumer staples fell -1.54%, and consumer discretionary fell -1.25%. The top sub-sectors were precious metals, gas, and electronic components, while leisure products, real estate, and household products were the worst. Northbound Stock Connect volumes were just above average. CNY and the Asia dollar index were slightly higher versus the US dollar. Treasury bonds fell. Copper and steel fell.

Last Night's Performance

Country/IndexTicker1-Day Change
China (Hong Kong)HSI Index-1.6%
Hang Seng TechHSTECH Index-2.4%
Hong Kong TurnoverHKTurn Index-8.6%
HK Short Sale TurnoverHKSST Index-6.3%
Short Turnover as a % of HK TurnovrN/A18.3%
Southbound Stock Connect Net Buy/Sell (US $ Millions)N/A534.1
China (Shanghai)SHCOMP Index-0.9%
China (Shenzhen)SZCOMP Index-1%
China (STAR Board)Star50 Index-0.1%
Mainland Turnover.chturn Index-5.8%
Nouthbound Stock Connect Net Buy/Sell (US $ Millions)N/ANot Available
Jing Daily China Global Luxury IndexCHINALUX Index0.4%
JapanNKY Index1.6%
IndiaSENSEX Index0.7%
IndonesiaJCI Index1%
MalaysiaFBMKLCI Index0.5%
PakistanKSE100 Index-1%
PhilippinesPCOMP Index0.1%
South KoreaKOSPI Index1.2%
TaiwanTWSE Index1%
ThailandSET Index0.7%
SingaporeSTI Index-0.4%
AustraliaAS51 Index0.3%
MSCI China All Shares Index# of StocksAverage 1-Day Change (%)
Hong Kong Listed152-1.99
Communication Services9-1.26
Consumer Discretionary30-3.42
Consumer Staples13-2.09
Energy7-0.88
Financials23-1.63
Health Care130.18
Industrials19-1.44
Information Technology10-1.28
Materials10-0.57
Real Estate6-2.28
Utilities12-0.79
Mainland China Listed432-0.65
Communication Services9-0.95
Consumer Discretionary31-1.22
Consumer Staples27-1.51
Energy16-0.91
Financials63-1.12
Health Care40-0.75
Industrials69-1.03
Information Technology850.97
Materials680.1
Real Estate7-3.25
Utilities17-0.4
US & Hong Kong Dually ListedTicker1-Day Change (%)
Tencent HK700 HK Equity-1
Alibaba HK9988 HK Equity-3.1
JD.com HK9618 HK Equity-4.3
NetEase HK9999 HK Equity-1.7
Yum China HK9987 HK Equity-2.1
Baozun HK9991 HK Equity-3.3
Baidu HK9888 HK Equity-2
Autohome HK2518 HK Equity-2.9
Bilibili HK9626 HK Equity-6.4
Trip.com HK9961 HK Equity-3
EDU HK9901 HK Equity-24.2
Xpeng HK9868 HK Equity-3.1
Weibo HK9898 HK Equity-2.5
Li Auto HK2015 HK Equity-3.6
Nio Auto HK9866 HK Equity-5.9
Zhihu HK2390 HK Equity0.3
KE HK2423 HK Equity-5.2
Tencent Music Entertainment HK1698 HK Equity1
Meituan HK3690 HK Equity-3.8
Hong Kong's Most Heavily Traded by Value 1-Day Change (%)
SEMICONDUCTOR MANUFACTURING0.5
TENCENT HOLDINGS LTD-1
MEITUAN-CLASS B-3.8
ALIBABA GROUP HOLDING LTD-3.1
XIAOMI CORP-CLASS B-1.7
JD.COM INC-CLASS A-4.3
PING AN INSURANCE GROUP CO-H-2.8
BYD CO LTD-H-1.1
CNOOC LTD-1.1
NEW ORIENTAL EDUCATION & TEC-24.2
Shanghai and Shenzhen's Most Heavily Traded by Value 1-Day Change (%)
ZHONGJI INNOLIGHT CO LTD-A10.4
ZTE CORP-A0.4
FOXCONN INDUSTRIAL INTERNE-A10
EAST MONEY INFORMATION CO-A-0.8
SHENZHEN WOER HEAT-SHRINK -A0
SERES GROUP CO L-A-5
CONTEMPORARY AMPEREX TECHN-A-2.3
EOPTOLINK TECHNOLOGY INC L-A6.2
SEMICONDUCTOR MANUFACTURIN-A-1.6
GIGADEVICE SEMICONDUCTO-CL A3.1

Last Night’s Exchange Rates, Prices, & Yields

  • CNY per USD 7.26 versus 7.28 yesterday
  • CNY per EUR 7.58 versus 7.56 yesterday
  • Yield on 10-Year Government Bond 1.66% versus 1.65% yesterday
  • Yield on 10-Year China Development Bank Bond 1.68% versus 1.68% yesterday
  • Copper Price -0.12%
  • Steel Price -0.89%