Huatai Securities: Currently, funds are still actively seeking "certainty" amid energy shocks

Huatai Securities’ research report notes that, last week, after the market adjusted, it saw a modest rebound. However, due to overseas risk disturbances, trading-type capital remained cautious in their dealings, showing a divergence between the market’s “money-making effect” and investor sentiment. Specifically, measured by the T+L up/down index, the market’s “money-making effect” had already been repaired to around the position of March 19 by the end of last week. But net outflows of margin financing expanded to 24 billion yuan, and trading activity fell to below 9%, marking the first time since July 2025. With the market worrying whether continued capital outflows amid shrinking trading volume could give rise to liquidity risks, we believe: 1) the market’s “money-making effect” is still present; the average margin guarantee ratio is relatively stable, and the probability of negative feedback occurring downward is relatively low; 2) capital is still actively seeking “certainty” amid the energy shock. Consensus is accelerating toward the energy substitution logic, and both indicate that while capital is taking an overall defensive stance, it still retains a strong willingness for structural long positions.

Full text as follows

Huatai | Strategy: Seeking certainty in defense

Last week, after the market adjusted, it saw a modest rebound. However, due to overseas risk disturbances, trading-type capital remained cautious in their dealings, showing a divergence between the market’s “money-making effect” and investor sentiment. Specifically, measured by the T+L up/down index, the market’s “money-making effect” had already been repaired to around the position of March 19 by the end of last week. But net outflows of margin financing expanded to 24 billion yuan, and trading activity fell to below 9%, marking the first time since July 2025. With the market worrying whether continued capital outflows amid shrinking trading volume could give rise to liquidity risks, we believe: 1) the market’s “money-making effect” is still present; 2) the average margin guarantee ratio is relatively stable, and the probability of negative feedback occurring downward is relatively low.

Key viewpoints

Focus point 1: Trading-type capital is cautious

After the market’s sharp drop on Monday last week, it saw a modest rebound. However, trading-type capital is cautious. Specifically, measured by the T+L up/down index, the market’s “money-making effect” fell to a stage low on Monday last week, and then was repaired to around the position of March 19 by the end of last week. But in terms of investor sentiment, the A-share sentiment index we observed remains continuously in the panic range. Last week’s margin financing saw net outflows of 24 billion yuan; compared with the prior period, the net outflow widened. Margin financing activity also narrowed in parallel to below 9%, marking the first time since July 2025. This “money-making effect” and sentiment divergence—or, in essence, the disturbance from overseas risks—means that the willingness of capital to enter the market remains relatively low. In addition, regarding the market’s concern about whether continued capital outflows in the next phase will lead to liquidity risks, we believe: 1) the market’s “money-making effect” is still present; 2) the average margin guarantee ratio is relatively stable, and the probability of negative feedback occurring downward is relatively low.

Focus point 2: Looking for certainty in the energy shock

Unlike what we described last week—capital seeking defensive directions amid the decline—this week capital is seeking more “certainty” within the shock. And in the direction of the energy substitution logic, consensus has formed relatively strongly: 1) although the buy/sell turnover ratio on the Dragon & Tiger Board relative to total A-share turnover continues to decline, the shares of sectors such as power and utilities, electricity-related new enterprises (电新), etc. keep rising; 2) mutual funds have increased positions in lithium batteries and power sectors; 3) trading-type capital such as margin financing also shows relatively high attention to the replacement logic under the shock, and capital adds to positions in utilities.

A look at the marginal changes across various types of capital

Retail capital: Last week, retail capital recorded net inflows of 3.75B yuan. Retail capital saw net inflows into sectors such as electronic devices, defense and military industry, and non-bank financials, while net outflows went to directions such as power equipment, non-ferrous metals, and machinery equipment.

Leverage-based capital: Last week, margin financing saw outflows of 24.01B yuan. Margin trading activity fell back to 8.94%. The market average margin guarantee ratio declined slightly quarter over quarter to 275.54%. Structurally, margin financing recorded net inflows into sectors such as power and utilities, coal and communications, and net outflows from sectors such as computer, defense and military industry, and automobiles.

Mutual funds & ETFs: Last week, the number of fund reporting meetings across various categories increased quarter over quarter, mainly driven by mixed-type and ETF funds. For ordinary funds and equity-focused funds, their equity exposure saw a slight decline, while the intensity of new launches saw a slight increase. Last week, ETF capital recorded net outflows of 12.25B yuan. Of this, broad-market ETFs recorded net outflows of 769M yuan. By sector, high-end manufacturing and public services saw the largest net inflow sizes. Among industries, net inflows led in sectors such as power equipment and new energy, power and utilities, and coal.

Foreign capital: Among allocation-type foreign capital tracked by EPFR, from March 18 to March 25, allocation-type foreign capital recorded net inflows of 5.04 billion yuan. Active allocation-type foreign capital saw outflows of 0.63 billion yuan, while passive allocation-type foreign capital saw net inflows of 5.66 billion yuan.

Risk warning: 1) the estimated position model fails; 2) there is an error in the data statistics methodology.

（Source: Jiemian News）