China International Capital Corporation: Who's Buying and Who's Selling?

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Source: China International Capital Corporation (CICC) Insights

Market trading sentiment has significantly improved, with trading volume hitting new record highs. Since the second half of last year, the A-share market has experienced oscillations upward, with a clear strengthening trend since mid-December. The Shanghai Composite Index achieved 17 consecutive positive days, reaching a near ten-year high. During this period, market activity has continued to increase, with daily average trading volume since the beginning of the year exceeding 3 trillion yuan, and an average turnover rate of 5.7%, marking the most active phase since 2015. On January 14, the total trading volume of the A-share market reached 3.99 trillion yuan, a record high, with a turnover rate of 7.4% based on freely tradable market capitalization—its highest level since October 2024. Recently, after a rapid rise, regulatory authorities stated they would “prevent large fluctuations,” leading to a slight decrease in trading volume across the two markets, though levels remain high.

The market’s upward movement driven by capital is quite evident, with a focus on changes in the capital environment and market implications. In our July 2025 report, “Five Major Changes in the A-Share Capital Environment and Their Market Implications,” we emphasized the importance of understanding market shifts from a capital perspective. Since the second half of last year, major indices have performed well, with various types of capital entering the market simultaneously, highlighting the market’s capital-driven nature. Combining recent capital data, the continuation of record-high financing balances, and fluctuations in stock ETFs are two prominent features of the A-share capital environment. Additionally, the return of foreign capital and the acceleration of medium- and long-term funds entering the market have become key factors supporting market performance. Regarding different investor types:

► Margin Financing & Private Equity Funds: High-risk appetite capital leads the way, with financing balances and private fund positions significantly rising. Margin financing typically correlates positively with market performance. Since September 2024, the scale of margin financing has experienced three rapid increases—first from September 24 to October 2024, then from June to October 2025, and again from December 2025 to now—each period showing notable market boosts. Recently, after surpassing a historical high in September 2025, the margin balance continued to rise, breaking through 27 trillion yuan, reaching a new record. The net inflow in this round of market rally is nearly 240 billion yuan, making it a significant driver. However, relative to its scale, it remains within a reasonable range. 1) As of January 30, margin financing accounted for 5.06% of the freely tradable market cap, slightly above the average of 4.76% since 2014; 2) Since 2026, margin trading volume has averaged 10.5% of total A-share trading volume, still well below the peak of about 20% in 2015. Private equity funds saw a significant increase in securities investment scale in Q4 2025, averaging 7.0 trillion yuan per month (vs. 5.93 trillion in Q3 2025). Regarding positions, data from China Resources Trust shows an average stock holding of 63.2% in Q4 2025, up 3.1 percentage points from the previous month to 64.4%, indicating improved risk appetite, though still slightly below the historical average of 66%.

► Individual Investors: Growth in household savings deposits combined with an “asset shortage” continues to attract individual investors into the market. Currently, China remains in a typical “asset shortage” environment, with high-yield assets gradually decreasing over the past three years, boosting the relative attractiveness of stocks. Since September 24, 2024, the market has been rapidly boosted, encouraging more individual investors to participate. Since late last year, the market has oscillated upward, with new account openings in A-shares continuously improving—averaging 2.43 million new accounts per month in Q4 2025. The incremental funds mainly come from leveraged capital and private funds, reflecting high-net-worth individuals entering the market. As market profitability further improves, increased household savings may become a structural trend for equity market allocation, with new account openings likely to further rise.

► Stock ETFs: Growth momentum has shifted. From October last year to January this year, net monthly capital flows into stock ETFs were 50.5/11.3/87.0/–792.2 billion yuan, showing two main features: 1) a shift in growth drivers, with sector and thematic ETFs gaining favor since January. In mid-December to late December, the CSI 500 ETF saw intensive capital inflows totaling 92.6 billion yuan, mainly driving stock ETF net inflows during that period. Subsequently, as structural market trends unfolded, sector and thematic ETFs attracted significant inflows, with net inflows of 211.7 billion yuan since the beginning of the year, mainly into non-ferrous metals, aerospace, satellites, and chemicals. 2) Recent ETF net outflows help stabilize market sentiment. Earlier, market sentiment was overheated at times, and regulators emphasized “preventing large swings.” From January 15 to 29, net outflows from key broad-based ETFs like CSI 300 and SSE 50 increased, with some discounts observed.

► Northbound Funds: Under the new monetary order, RMB assets are relatively benefiting, with foreign capital gradually returning to the A-share market. Dr. Miao Yanliang of CICC’s research department pointed out in June 2024 that under the new monetary order, the dollar entered a downward cycle, with the “anchor” effect of U.S. Treasury yields on non-U.S. markets weakening, and the suppression on RMB assets potentially diminishing. Additionally, RMB assets are expected to benefit from the accelerated fragmentation and diversification of the global monetary system—fragmentation may speed up China’s overseas capital inflows, while diversification could drive global capital rebalancing, encouraging some funds to flow back into Chinese assets. Recent data shows signs of partial fragmentation and diversification in the global monetary system. Meanwhile, RMB exchange rate recovery will also drive foreign capital back into A-shares. As of December 31, 2025, northbound funds held 2.59 trillion yuan. Based on disclosed holdings and average during the quarter, we estimate a slight net inflow of 11.7 billion yuan in Q4. According to high-frequency EPFR data, since mid-December, with the market rebound, overseas passive and active funds have continued to flow in, with active funds turning net inflows, indicating a potential further increase in foreign investment in A-shares.

► Insurance Funds: Medium- and long-term capital accelerates into the market, enhancing resilience. Last year, the six departments including the Central Financial Work Commission and CSRC issued a joint plan to promote medium- and long-term funds into the market, explicitly guiding large state-owned insurance companies to increase their A-share (including equity funds) investments. By Q3 2025, insurance holdings of stocks and securities investments reached 5.6 trillion yuan, a new high since 2013, with a 1.9 percentage point increase in position to 14.9%. The strong performance at the start of the year, with leading insurers reporting high premium growth, supported new premiums entering the market. Looking ahead, with policies encouraging long-term funds and experience from mature overseas markets, insurance institutions’ equity allocations still have room to grow, potentially boosting market resilience.

► Active Funds: Active funds regain excess returns, with new fund launches and redemptions showing positive signs. Since December 17, the mixed equity fund index has gained 11.6%, outperforming the CSI 300 by about 7 percentage points, supported by increasing market signals. As active fund performance improves, new fund launches and redemptions have also shown positive changes. In Q4 2025, average monthly and January new fund launches of active equity funds were 61.8 billion and 101.2 billion units, respectively, showing clear improvement since the start of the year. Regarding redemptions, based on fund share and net asset data, net redemptions in Q4 decreased to 165.8 billion yuan from the previous quarter, at relatively low levels in recent years.

► Industry Capital: Net reductions in industry capital have increased, but corporate buybacks remain relatively high. Industry capital saw net reductions with marginal increases in Q4 2025 and since January, with net changes of –131.8 and –50.5 billion yuan, respectively, but still below historical averages. Since the start of the year, electronics, communications, and pharmaceuticals have been the main sectors reducing holdings; transportation, banking, electricity, and utilities have been the main sectors increasing holdings. Regarding buybacks, companies have been actively repurchasing shares, with a total of 143.2 billion yuan in 2025, though recent buyback scale slightly declined, averaging 10.1 billion yuan/month in Q4 (vs. 12.6 billion in Q3).

In terms of structural allocation, recent focus by institutional investors on the A-share market has increased, with public funds and foreign investors generally increasing holdings in non-ferrous metals, communications, and other sectors. In Q4, institutional holdings showed the following characteristics: 1) increased allocation to A-shares. Over recent years, active equity funds maintained stable stock positions, but in Q2 2024, public funds sharply increased their allocation to Hong Kong stocks, reaching 70.6% in A-shares and 16.9% in Hong Kong stocks by Q2 2025—setting new highs. Since then, A-shares outperformed Hong Kong stocks, with the allocation ratio rising to 72.8% by Q4 2025, though still low compared to the past decade. Private equity funds also increased their A-share holdings and reduced Hong Kong stock exposure, with the proportion of Hong Kong stocks dropping from around 40% mid-2024 to 34% in December 2025, with A-shares at 66%. 2) Sector-wise, in Q4, active equity funds increased holdings mainly in non-ferrous metals, communications, and non-bank financials, while reducing positions in electronics and biotech. The bullish demand for emerging industries supported higher upstream demand, with prices of non-ferrous metals remaining strong due to loose overseas liquidity and steady demand. Sector allocations increased by 2.3 percentage points for non-ferrous metals and 2 percentage points for communications. Conversely, electronics and biotech saw reductions of 1.8 and 1.7 percentage points, respectively. Northbound funds also increased holdings in non-ferrous metals, communications, and basic chemicals, with respective increases of 2.0, 0.7, and 0.3 percentage points, while reducing holdings in biotech, consumer staples, and automotive sectors. Overall, active public funds and northbound funds show similar trends: increasing positions in non-ferrous metals, communications, and decreasing in biotech and consumer sectors.

Market trading sentiment is expected to remain relatively active, with continued inflow of incremental funds. With the macro paradigm shift and ongoing reforms in the capital market system, we believe the A-share environment has evolved from quantitative to qualitative change, better positioning it for a “slow bull” trend in the medium to long term. In the short term, due to previous rapid turnover and increased external uncertainties, phase fluctuations are possible. On the capital front, market sentiment is likely to stay active, supported by low interest rates, asset shortages, and excess household savings, which provide favorable funding conditions. Household deposits still have potential to shift further. Institutional investors currently have room to increase their A-share holdings; with supportive policies and deeper reforms, medium- and long-term funds are expected to accelerate entering the market, providing stable long-term capital. Foreign capital benefits from the reorganization of the global monetary order, with potential for increased allocations, leading to sustained inflows into the A-share market.

In terms of allocation, recent recommendations focus on the following areas: 1) Growth sectors: AI technology has experienced rapid development over three years, expected to gradually enter industrial application phases by 2026. Opportunities remain in optical modules, cloud infrastructure, with a possible domestic orientation; applications include robotics, consumer electronics, and intelligent driving. Innovation pharmaceuticals, energy storage, and solid-state batteries are also entering growth cycles. 2) External demand breakthroughs: Overseas expansion remains a relatively certain growth opportunity. Considering the trend of globalization and U.S. exposure, focus on home appliances, engineering machinery, commercial vehicles, power grid equipment, gaming, and global resource-based commodities like non-ferrous metals. 3) Cyclical reversal: Based on capacity cycle positions, focus on sectors nearing demand-supply improvement inflection points or supported by policies, such as chemicals, aquaculture, and new energy. 4) High-quality high-dividend stocks: Long-term funds entering the market tend to favor high-dividend leaders with stable cash flows, volatility, and dividend certainty. 5) Areas with quarterly earnings highlights: such as gold, TMT sectors benefiting from AI, and non-bank financials.

Charts:

1. Recent A-share market capital flow has entered its most active phase since 2015, with daily average trading exceeding 3 trillion yuan.
2. Market capital fluctuations since the beginning of the year, with margin financing and stock ETFs as main influences.
3. Financing balance temporarily surpassing 2.7 trillion yuan, reaching new highs.
4. Since the start of the year, margin trading volume has averaged 10.5% of total A-share trading, still below 2015 peaks.
5. As the market rises, private fund positions in December increased to 64.4%, still below historical averages.
6. Investor participation remains active, with an average of 2.43 million new accounts per month in Q4 2025.
7. Shift in net inflows into stock ETFs, with sector/theme ETFs favored in January.
8. Since late December, overseas passive and active funds have turned net inflows, supported by market performance.
9. Insurance holdings of stocks and securities investments reached 5.6 trillion yuan in Q3 2025, a record high.
10. Rapid growth in new equity fund units in January, reaching 101.2 billion units.
11. Industry capital net reductions increased, but overall still below historical levels.
12. Cumulative buybacks since January totaled 6.4 billion yuan.
13. Active equity funds’ A-share allocation has increased.
14. In Q4, public funds increased holdings in communications, industrial metals, and insurance; reduced in consumer electronics, batteries, and pharmaceuticals.
15. Northbound funds increased holdings in industrial metals, communications, and insurance sectors in Q4.

[1] https://tv.cctv.com/2026/01/17/VIDE2TRUiAtYp4cCCEQghX1q260117.shtml

[2] https://www.gov.cn/lianbo/bumen/202501/content_7000515.htm

This article is excerpted from: “Full View of Capital Flows: Who is Buying, Who is Selling?” published on February 1, 2026.

Analysts: Li Qiusuo, SAC Certified Analyst, License No.: S0080513070004, SFC CE Ref: BDO991 Liu Xinyi, SAC Certified Analyst, License No.: S0080525060006 Huang Kaisong, SAC Certified Analyst, License No.: S0080521070010, SFC CE Ref: BRQ876 Li Jin, SAC Certified Analyst, License No.: S0080520120005, SFC CE Ref: BTM851 Zhang Xinyu, Contact Person, SAC License No.: S0080124070034 Chen Shiyuan, Contact Person, SAC License No.: S0080125070053

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Editor: Shi Xiuzhen SF183