Qualified Foreign Institutional Investors Up Their Chinese A-Share Market Holdings by Nearly 20%
Jin Yuanjia
/SOURCE : Yicai
Qualified Foreign Institutional Investors Up Their Chinese A-Share Market Holdings by Nearly 20%

(Yicai Global) Aug. 18 -- Qualified Foreign Institutional Investors (QFIIs) increased their holdings on China's A-share market by nearly 20 percent in the first half.

These investors were among the top ten holders of tradable shares for 46 listed companies, and they held a total of 757 million shares with a market capitalization of USD4.2 billion (CNY28.3 billion), the 21st Century Business Herald reported. QFIIs increased their holdings by 139 million shares or 18.4 percent in the first six months of this year. Consumer sectors such as electronics, food and beverage, pharmaceuticals and biomedicine were still QFIIs' favorites.

Known for their long-term plans, QFIIs have traditionally focused on value investments. Hangzhou Hikvision Digital Technology Co. [SHE:002415] is the stock in which QFIIs hold the largest number of shares. UBS Group AG [SIX:UBSG] held 125 million shares in Hikvision worth CNY4.03 billion at the end of June.

Kweichow Moutai Co. [SHA:600519] has the largest market capitalization among firms backed by QFIIs. E Fund Management (Hong Kong) Co., OppenheimerFunds Inc. and GIC Private Ltd. held a total of 23.703 million shares in the beverage firm, with a market capitalization as high as CNY11.18 billion.Kweichow Moutai saw its share price rise more than 40 percent in the first half to become the most expensive stock on the A-share market by breaking the CNY500 threshold after starting the year near CNY300 per share.

Sichuan Swellfun Co. [SHA:600779] stock rose 29.3 percent in the first half and 81.2 percent in the year. It was backed by five QFIIs -- Goldman Sachs Group Inc. [NYSE:GS], China International Capital Corp. [HK:3908] (CICC), Bank of America Merrill Lynch International Ltd., JPMorgan Chase & Co. [NYSE:JPM] and UBS. CICC began investing in Swellfun in the second quarter and purchased 7,069,000 of its shares. Goldman Sachs increased its holdings in the company by 5,299,000 shares to 11.986 million shares at the end of the second quarter.

QFIIs purchased shares in ten listed groups, including Henan Province Xixia Automobile Water Pump Co. [SHE:002536], Iflytek Co. [SHE:002230], Spring Airlines Co. [SHA:601021] and Centre Testing International Group Co. [SHE:300012], in the second quarter. The Hong Kong Monetary Authority and The National Pension Service of Korea bought 2.052 million and 1.59 million shares in Xixia Automobile Water Pump, respectively. The Abu Dhabi Investment Authority purchased 6,426,000 Iflytek shares, whose price went up 47.8 percent in the first half.

"QFIIs' shareholding characteristics are very obvious," said Li Changmin, general manager of Xueqiu.com. "They make classical value investments as they focus on fundamentals when selecting securities. The profit growth rate of all of the individual stocks held by QFIIs was more than 30 percent, and their growth was sustainable -- mainly driven by business operations rather than subsidies or other one-off investments. Therefore, the performance of the securities held by QFIIs was very eye-catching in the first half of the year."

In the second quarter, QFIIs sold off some stocks that had significantly increased. QFIIs offloaded 14 stocks, eight of them witnessed net reductions, 10jqka.com.cn statistics show. Lens Technology Co. [SHE:300433] stock rose 26.9 percent in the first half. Cathay Securities Investment Trust Co. and Nan Shan Life Insurance Co. sold it in the second quarter. Norges Bank reduced its stake in Beijing OriginWater Technology Co. [SHE:300070] by 6.598 million shares from 35.183 million at the end of March to 28.585 million at the end of June.

Overall, QFIIs maintained interest in the A-share market. QFIIs' approved cumulative investment quota reached USD93.274 billion, an increase of USD500 million from the end of last month, State Administration of Foreign Exchange data show.

As the investment limit stably increases, foreign investors will make their way into the A-share market more quickly, said Fu Lichun, chief research officer at Northeast Securities Inc. This will increase the amount of funding on the market, and set an example for domestic investors, which in turn will promote the internationalization of A-shares and steer domestic investors towards value investments, he said.

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Keywords: MSCI , Foreign Funded Bank