Among the top 10 industries in which foreign investors will increase their holdings in 2024, the financial sector occupies four seats, including joint-stock banks, large state-owned banks, city commercial banks and insurance

Text: "Caijing" reporter Zhang Jianfeng and Wang Ying

Editor|Yang Xiuhong

On January 8, 2025, northbound funds (Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect), which are the main forces of foreign capital, announced the 2024 A-share shareholding data, which is the first time that the annual shareholding data of northbound funds has been unveiled after the adjustment of the Shanghai-Shenzhen-Hong Kong communication disclosure mechanism.

Wind data shows that as of the end of 2024, northbound funds hold a total of about 123.7 billion shares of A-share companies and a total market value of about 2.21 trillion yuan, a year-on-year increase of about 2.74% and 10.53% respectively.

According to Wind statistics, in 2024, northbound funds will increase their holdings (net purchases, the same below) of about 9.391 billion yuan in A-share companies. During the same period, 55 industries in the A-share Shenwan industry classification were increased by northbound funds, 25 industries increased their holdings by more than 1 billion yuan, and the top ten industries increased their holdings by more than 3.9 billion yuan.

Among them, joint-stock banks, electric power, and semiconductor industries ranked the top three with an increase of 17.436 billion yuan, 16.022 billion yuan, and 14.432 billion yuan respectively. Among the top 10 industries in which foreign investors increase their holdings, the financial sector occupies four seats, including joint-stock banks, large state-owned banks, city commercial banks and insurance.

UBS research team recently expressed the view that as a stable high-dividend dividend stock, the entire banking sector is still attractive in a low interest rate environment. For the banking industry, 2025 will face challenges such as further decline in interest rates and a decline in ROE (return on equity). At the same time, the bank said that opportunities may arise in challenges, and it is expected that the low-interest rate environment will accelerate the recovery of real estate and reduce the impact on banks; However, the decentralization of local bonds has been intensified, and the asset structure of banks has been gradually optimized.

The continuous growth of profitability is the common feature of the industries where northbound funds focus on increasing their holdings. Wind data shows that in the first three quarters of 2024, the net profit attributable to the parent company of the top 10 industries with the above-mentioned northbound funds increased year-on-year. Among them, the net profit attributable to the parent company of six industries increased by more than 20% year-on-year, and the year-on-year growth rate of insurance and precious metals exceeded 40%, ranking the top two.

From the perspective of individual stocks, among the top 10 companies in 2024, the amount of northbound funds increased will exceed 2.9 billion yuan. In the first three quarters of 2024, seven of the above ten companies achieved a year-on-year increase in net profit attributable to their parent companies.

Caijing, sorted out according to Wind data, sorted by net purchases from low to high, the top 10 industries in which northbound funds will increase their holdings of A-shares in 2024 are as follows:

(Source: Caijing, compiled from Wind data; The amount of the increase is the net purchase amount).

10th place: Precious metals

Increase in holdings: 4 billion yuan

In 2024, eight companies in the A-share precious metals sector will be increased by northbound funds, and five companies will increase their holdings by more than 100 million yuan.

Among them, the highest amount of holdings is Chifeng Gold (600988. SH), the increase in holdings is 1.665 billion yuan, and the stock will increase by 11.74% in 2024; In second place is CICC Gold (600489. SH), the increase in holdings is 1.054 billion yuan, and the share price will increase by 23.5% in 2024; In third place is Shandong Gold (600547. SH), the increase in holdings amounted to about 740 million yuan.

Performance growth, or the main factor for northbound funds to increase their holdings of precious metals. Wind data shows that in the first three quarters of 2024, the operating income and net profit attributable to the parent company of Shenwan precious metals segment were 223.146 billion yuan and 9.361 billion yuan respectively, a year-on-year increase of 25.49% and 46.19% respectively. Chifeng Gold, which has been greatly increased by northbound funds, has doubled its net profit attributable to the parent company year-on-year, and Shandong Gold and Shanjin International (000975. SZ) net profit attributable to the parent company increased by more than 50% year-on-year.

For the future trend of the precious metals sector, Minmetals Futures believes that the U.S. non-farm payrolls data exceeded expectations, but the sharp rise in crude oil prices on January 10, 2025 raised inflation expectations, and the impact of the weak performance of U.S. stocks was superimposed, precious metal prices were supported, and international gold prices performed strongly.

Ruida futures said that the long and short game in the precious metals market may intensify, and gold prices may remain volatile in the short term, and in the medium and long term, the central bank's continued gold purchases are expected to support the upward movement of gold prices.

9th place: shipping port

Increased holdings: 4.622 billion yuan

The shipping industry occupies a vital position in global transportation and is a barometer of international economic and trade trends, with about 90% of the global merchandise trade freight volume being completed by sea. In 2024, among the 31 shipping port companies traded by northbound funds, 24 companies will increase their holdings, and 5 companies will be reduced (net selling, the same below). There are seven companies that have increased their holdings by more than 100 million yuan.

Among them, the highest amount of holdings was COSCO Shipping Holdings (601919. SH), with an increase of 2.514 billion yuan, the stock will rise by 70.12% in 2024, COSCO SHIPPING Holdings is the listed flagship enterprise and capital platform of COSCO SHIPPING Group's shipping and terminal operation main business, and is currently the world's fourth largest container liner company. In second place is China Merchants Nanyou (601975. SH), the increase in holdings is 532 million yuan, and the share price will increase by 11.79% in 2024; In third place is COSCO Shipping Energy (600026. SH), with a net purchase of $421 million, and the share price will fall by 1.15% in 2024.

Overall, the shipping port sector will rise by 31.15% in 2024, and the stock prices of ten companies will rise by more than two percent.

From the perspective of performance, in the first three quarters of 2024, the Shenwan shipping port sector achieved a total operating income of 433.824 billion yuan, a year-on-year increase of 16.24%; The net profit attributable to the parent company was 83.159 billion yuan, a year-on-year increase of 22%. There are 15 companies with a net profit of more than 1 billion yuan attributable to the parent company, including COSCO Shipping Holdings, Shanghai Port Group (600018. SH) net profit attributable to the parent company exceeded 10 billion yuan, 38.124 billion yuan and 11.811 billion yuan respectively.

In terms of industry, since 2024, a number of global shipping giants have once again announced that they will increase ocean freight prices, and the performance expectations of shipping companies have also been continuously raised. A number of brokerages said that the global port congestion is becoming more serious, and the short-term capacity supply shortage may be further deepened, and the shipping sector of the A-share market has benefited. Continued tensions in the Middle East make it difficult for the Red Sea bypass to end in the short term, and the slowdown in new ship deliveries and a sizable increase in demand are expected to support freight rates.

Some brokerages also reminded that shipping is a typical cyclical industry, which is affected by geopolitics, rising commodity prices, international trade and other factors, and fluctuates greatly.

8th place: insurance

Increased holdings: 6.204 billion yuan

In 2024, six insurance companies will be increased by northbound funds, with a total of 176 million shares and an increase of 6.204 billion yuan.

From the perspective of individual stocks, Ping An of China (601318. SH), Chinese Shou (601628. SH), China Pacific Insurance (601601. SH) received an increase of 4.448 billion yuan, 1.144 billion yuan, and 555 million yuan respectively, ranking among the top three in the industry. During the same period, the stock prices of the three companies rose by more than 30%.

Looking back at the A-share market in 2024, bank stocks and insurance stocks have become an upward force that is difficult to ignore. In 2024, the insurance sector will rise by 48.18%. The stock prices of the six insurance companies mentioned above rose by more than 30%, and Chinese Insurance (601319. SH), Tianmao Group (000627. SZ) share price rose by more than 60% for the whole year.

In the first three quarters of 2024, the performance of Shenwan's insurance sector was outstanding, although the operating income increased by 20.75% year-on-year to 2.12 trillion yuan, the net profit attributable to the parent company increased by 78.32% year-on-year to 318.693 billion yuan. There are five companies with a net profit of more than 20 billion yuan, of which Ping An of China ranks first, achieving a net profit of 119.182 billion yuan; Chinese Life is close behind, achieving a net profit of 104.523 billion yuan. There are two companies whose net profit attributable to the parent company has doubled year-on-year, namely Xinhua Insurance (601336. SH) and Chinese Shou.

According to reports, on January 10, 2025, the State Administration of Financial Supervision and Administration issued the Notice on Matters Concerning the Establishment of a Mechanism for Linking Predetermined Interest Rates to Market Interest Rates and Dynamic Adjustment (hereinafter referred to as the "Notice") to the industry, requiring the establishment of a mechanism for linking predetermined interest rates to market interest rates and dynamic adjustments, and guiding companies to strengthen asset-liability linkage and scientific and prudent pricing.

Some brokerages said that the issuance of the "Notice" will help to establish a mechanism for linking the predetermined interest rate with the market interest rate and dynamic adjustment in the context of the continuous decline in long-term interest rates, which can improve the efficiency and timeliness of the adjustment of the predetermined interest rate in the insurance industry, improve the asset-liability matching level of insurance companies, and help insurance companies reduce the cost of liabilities and prevent and mitigate the risk of interest rate loss.

7th place: City Commercial Bank

Increased holdings: 6.666 billion yuan

Northbound funds have always favored high-dividend sectors such as banks, electricity, and insurance. The banking industry occupies three of the top 10 industries in the list of northbound capital holdings, and city commercial banks rank behind large state-owned banks and joint-stock banks. In 2024, northbound funds will increase their holdings of 956 million shares of city commercial banks, with an increase of 6.666 billion yuan.

From the perspective of individual stocks, 17 city commercial banks have been increased by northbound funds, and 13 companies have increased their holdings by more than 100 million yuan. Among them, Bank of Jiangsu (600919. SH), Bank of Beijing (601169. SH), Bank of Hangzhou (600926. SH) has increased its holdings by more than 700 million yuan, ranking among the top three in the industry.

In 2024, the Shenwancheng Commercial Bank sector will rise by 46.66%. There are 14 city commercial banks whose share prices have risen by more than 20%, accounting for more than 80%, of which 5 city commercial banks have risen by more than 50%.

In the first three quarters of 2024, the Shenwancheng Commercial Bank segment achieved a total operating income of 383.736 billion yuan, a year-on-year increase of 3.9%; The net profit attributable to the parent company was 159.979 billion yuan, a year-on-year increase of 6.7%. There are six companies with net profit attributable to the parent company exceeding 10 billion yuan, of which the net profit attributable to the parent of Bank of Jiangsu and Bank of Beijing both exceeds 20 billion yuan. There are six companies with a year-on-year increase of more than 10% in net profit attributable to the parent company.

UBS research team said that from the perspective of city commercial banks, dividends are attractive and profit growth is at the same time. Wind data shows that the dividend yield of the city commercial bank sector in 2024 will be 5.33%, ranking fifth in the industry, and the yield of the fixed income market is attractive.

6th place: chemical pharmaceuticals

Increased holdings: 7.89 billion yuan

Chemical pharmaceuticals are one of the important subdivisions in the pharmaceutical and biological industry. In 2024, 51 of the 112 chemical and pharmaceutical companies traded with northbound funds will be increased, of which 16 companies will be increased by more than 100 million yuan.

Among them, the highest amount of increased holdings is Hengrui Pharmaceutical (600276. SH), the increase in holdings is 2.817 billion yuan, and the stock will increase by 1.98% in 2024; In second place is BeiGene (688235. SH), the amount of increased holdings is nearly 1 billion yuan, and the company's stock price will increase by 15.8% in 2024; In third place is Kelun Pharmaceutical (002422. SZ), with an increase of 767 million yuan, an increase of 6.4% in 2024.

In addition, Huahai Pharmaceutical (600521. SH), Jianxingyuan (600380. SH), Xingqi Ophthalmic Medicine (300573. SZ), Fosun Pharma (600196. SH) four companies, which received more than 500 million yuan in northbound funds.

From the perspective of performance, in the first three quarters of 2024, Shenwan Chemical and Pharmaceutical Sector achieved a total operating income of 412.306 billion yuan, a year-on-year increase of 5.01%; The net profit attributable to the parent company was 36.795 billion yuan, a year-on-year increase of 35.95%. Among them, there are 70 companies with a net profit of more than 100 million yuan, accounting for more than 40%. Hengrui Pharmaceutical won the first place with 4.62 billion yuan, and Kelun Pharmaceutical, Jianxingyuan, and Huahai Pharmaceutical, which were heavily increased by northbound funds, also had a net profit attributable to the parent company of more than one billion yuan.

According to the analysis of the research report of the China Research Industry Research Institute, in the long run, China's aging population is still continuing, health investment continues to increase, and the medical expenditure of the elderly is significantly higher than that of young people, and medical expenditure is facing a rise in volume and price, and China's pharmaceutical and biological industry will continue to maintain good and rapid development during the "14th Five-Year Plan" period. By 2025, the innovation capacity of the chemical industry will be significantly enhanced, and the supply guarantee system will be more perfect.

5th place: Industrial metals

Increased holdings: 7.899 billion yuan

In 2024, 24 companies in the A-share industrial metals industry will be increased by northbound funds, and 11 companies will increase their holdings by more than 100 million yuan. Among them, Zijin Mining (601899. SH), Jiangxi Copper (600362. SH), Nanshan Aluminum (600219. SH) has increased its holdings by more than 1.3 billion yuan, ranking among the top three in the industry.

From the perspective of performance, Wind data shows that in the first three quarters of 2024, the total operating income and net profit attributable to the parent company of the industrial metal sector will be 1.82 trillion yuan and 74.4 billion yuan respectively, with a year-on-year increase of 4.06% and 29.38% respectively. Zijin Mining and Nanshan Aluminum, which have received a large increase in northbound funds, have increased their net profit attributable to the parent company by more than 50% year-on-year.

During the same period, the total cash dividends of the industry totaled 2.186 billion yuan, ranking fourth in the industry.

"Looking back on 2024, metal prices have been full of twists and turns, the overall pivot has risen, and the stock price of the sector has performed well." According to the analysis of some brokerages in the "2025 Annual Investment Strategy Series Report", looking forward to 2025, domestic policies will exert force, the restructuring of the supply chain will accelerate under the trend of anti-globalization, and the supply-side constraints will continue, and the price center of industrial metals is expected to rise again.

4th place: large state-owned banks

Increased holdings: 9.578 billion yuan

In 2024, large state-owned banks will rank fourth in the industry ranking of northbound capital holdings. During the current period, the six large state-owned banks were all increased by northbound funds, with a total of 1.923 billion shares and a total amount of 9.578 billion yuan. Among them, Industrial and Commercial Bank of China (601398. SH), Agricultural Bank of China (601288. SH), Bank of Communications (601328. SH) increased its holdings by more than 1.6 billion yuan, ranking among the top three.

In terms of growth, in 2024, the large state-owned bank sector will rank ninth in the third-level industry of Shenwan with an increase of 48.15%, and the share prices of the six banks will all rise by more than 30%, with a total market value increase of about 2.39 trillion yuan.

From the perspective of performance, in the first three quarters of 2024, more than eighty percent of large state-owned banks achieved a year-on-year increase in net profit attributable to their parent companies. On December 31, 2024, the static price-earnings ratio of the large state-owned bank sector was only 6.81 times, ranking 126th in the third-level industry of Shenwan.

At the policy level, there is good news for large state-owned banks. At a press conference of the Information Office of the State Council in October 2024, Minister of Finance Lan Foan said that a package of targeted incremental policy measures will be launched one after another. One of the measures is to issue special treasury bonds to support large state-owned commercial banks to replenish their core Tier 1 capital, improve their ability to resist risks and provide credit, and better serve the development of the real economy.

According to the analysis of brokerages, in the long run, supplementing capital to large banks will help ensure the effective support of large banks for the entity, real estate and other industries, maintain appropriate asset growth rates, enhance long-term sustainable profitability and dividend distribution capabilities, and be conducive to the sustainability of high dividends.

3rd place: semiconductors

Increased holdings: 14.432 billion yuan

Semiconductors, which have significantly increased the prosperity of the industry, have been favored by northbound funds. In 2024, 22 A-share semiconductor industry companies will receive northbound funds to increase their holdings by more than 100 million yuan. Among them, NAURA (002371. SZ), Montage Technology (688008. SH) has increased its holdings by more than 3 billion yuan, ranking among the top two in the industry.

During the same period, the A-share semiconductor sector rose by 57%, ranking fifth in the industry. Among them, the stock prices of more than 40% of companies in the industry rose, and the stock prices of 21 companies rose by more than 50%.

The sharp rise in performance is a major feature of the semiconductor industry in 2024. In the first three quarters of 2024, among the 161 A-share semiconductor companies, more than half of the companies have a year-on-year increase in net profit attributable to their parent companies, and 36 companies have increased by more than 100%. Montage Technology, which has been heavily increased by northbound funds, saw a year-on-year growth rate of 318% in net profit attributable to the parent company in the same period.

Semiconductors are known as "industrial food", and their industrial chain includes design, manufacturing, packaging and testing, equipment, materials, and EDA (electronic design automation). Among them, the chip design is an asset-light model, although there are more than 3,000 companies involved in Chinese mainland, but the EDA tool market used in the design is monopolized by overseas giants. On the manufacturing side, in the wafer foundry market, Taiwan, China leads, and Chinese mainland's core advantage is in the packaging and testing link.

In recent years, with the gradual transfer of the global wafer foundry industry to Chinese mainland, domestic upstream equipment and material companies have developed rapidly.

According to the analysis of brokers, in the long run, with the localization demand for semiconductor core technology highlighted, the localization rate of domestic industrial chain enterprises is stronger, which brings more opportunities to domestic semiconductor companies, and the market potential brought by the introduction of localized equipment, materials, parts and EDA is worth paying attention to. In addition, the export controls to China recently announced by the U.S. government will also force China's AI (artificial intelligence) related software and hardware products to accelerate the development independently, controllably.

2nd place: electricity

Increased holdings: 16.022 billion yuan

With an amount of more than 16 billion yuan, the power industry ranks second in the increase in northbound capital holdings in 2024. During the same period, 45 of the 88 A-share power companies traded by northbound funds were increased by northbound funds, accounting for more than half of the total. Among them, there are a total of 20 companies in the industry with a northbound capital increase of more than 100 million yuan, and Yangtze River Power (600900. SH), China Nuclear Power (601985. SH), SDIC Power (600886. SH) ranked the top three, with an increase of about 3.5 billion yuan, 2.6 billion yuan and 1.8 billion yuan respectively.

The power sector is up 17.28% in 2024. During the same period, among the 103 A-share power companies, 50 companies rose in stock prices, accounting for nearly half of the total.

In the first three quarters of 2024, the operating profit of the power sector totaled 246.5 billion yuan, a year-on-year increase of 11.06%. In the same period, among the 103 companies in the A-share power industry, more than 60% of the company's net profit attributable to the parent company increased year-on-year, and 19 companies increased by more than 50%. The net profit attributable to the parent company of Yangtze Power, which has been greatly increased by northbound funds, has increased by more than 30% year-on-year, ranking 27th in the industry.

According to the analysis of Galaxy Securities in the "2025 Power Industry Investment Strategy", distinguishing different power sources, although new energy enters the spot market and faces the dilemma of discounting, considering the high proportion of medium and long-term positions and the recovery of income in some markets, the stability of new energy settlement electricity prices is significantly improved compared with spot electricity prices; In terms of thermal power, its strong adjustment ability allows it to benefit from the widening peak-to-valley price gap in the spot market, and thermal power has the ability to make money in the spot market.

1st place: joint-stock bank

Increased holdings: 17.436 billion yuan

With its strong earning capacity, joint-stock banks have become the largest industry for northbound funds to increase their holdings in the A-share market in 2024.

Wind data shows that the 9 joint-stock listed banks in the A-share market will all be increased by northbound funds in 2024. Among them, China Merchants Bank (600036. SH), Industrial Bank (601166. SH), Shanghai Pudong Development Bank (600000. SH) was increased by about 5.8 billion yuan, 3.7 billion yuan and 3.2 billion yuan respectively, ranking among the top three in the industry.

The rise in stock prices is a common feature of joint-stock banks. In 2024, the joint-stock banking sector will rise by 42.55%. During the same period, the stock prices of nine joint-stock banks rose by more than 20 percent, and the stock prices of five banks rose by more than 40 percent.

The

profitability of joint-stock banks, which have received a large increase in northbound funds, has also continued to improve. In the first three quarters of 2024, the net profit attributable to the parent company of the six banks increased year-on-year, accounting for more than 60%. In the same period, in terms of profit scale, the net profit attributable to the parent of the nine joint-stock banks exceeded 10 billion yuan, and the data of the first three companies exceeded 50 billion yuan, and China Merchants Bank ranked first with more than 100 billion yuan. In 2024, the dividend yield of joint-stock banks is 5.54%, ranking third in the industry.

"With the gradual implementation of a package of economic stabilization policies, it will have a certain lifting effect on China's economy." According to the analysis of some institutions, looking forward to 2025, China's economic operation will maintain steady growth, the active adjustment of macro policies will stabilize social expectations to a certain extent, and the repair of the real estate market and the promotion of debt replacement are expected to alleviate the operating pressure of related industries and provide strong support for the business environment of joint-stock banks.