After a rapid correction in the market, some capital signals are beginning to emerge.

From October 15th to 16th, the Shanghai Composite Index saw repeated fluctuations around 3,700 points, with several key indices hitting new lows of nearly a year during the session. Amidst the market's downward volatility, a group of funds that went against the trend quietly entered the market through broad-based index funds ETF. Some of the leading broad-based index funds ETF saw transactions in the tens of billions towards the end of the session, and the suddenly rising transaction volume curve broke the dullness of the market.

Data shows that on the 15th, the Yifangda CSI 300 ETF had transactions of over 17.3 billion yuan in the last half hour of trading, with a net inflow of 18.8 billion yuan for the entire day; the effect of capital relay occurred the next day, as funds shifted to Huatai-PineBridge CSI 300 ETF and Huaxia SSE 50 ETF. The former saw transactions of 12.562 billion yuan in the last 20 minutes of trading, with a net inflow of 13 billion yuan for the whole day.

Behind the market momentum is a continuous inflow of funds over several days. The stock fund ETF has seen net inflows for 13 consecutive trading days, accumulating a total of over 180 billion yuan; on just the 15th and 16th, there was a combined net inflow of 73.1 billion yuan, with the broad-based fund ETF contributing more than 90% of that amount. At the same time, hundreds of listed companies have disclosed their repurchase plans or the latest progress, with multiple supportive forces converging simultaneously.

The trading volume of broad-based products in the sector has suddenly increased significantly, with tens of billions of funds entering the market concentratedly. These unusual market movements have sparked widespread discussion among investors. Several respondents believe that the downside risks to the market are limited, but the recovery of risk appetite still awaits catalytic factors. Before the market returns to its strong upward trend, it is likely that we will see a pattern of weak consolidation and structural rotation in the short term.

After losing 3,800 points within a month, the Shanghai Composite Index has been in a tug-of-war around 3,700 points for the past two trading days, with the lowest point reaching 3,674.82 points, setting a new low in nearly a year. As of the close on October 16th, the Shanghai Composite Index managed to hold above the 3,700 mark, closing at 3,716.28 points, with an annual return of -6.36%.

Other important indices also saw oscillatory corrections; the Shenzhen Component Index and the GEM Index both hit new lows of nearly a year during trading on two consecutive days. Over the past week, they have fallen by 6.64% and 8.9% respectively, with their annual cumulative declines expanding to 12.74% and 13.45% respectively. Small-cap stocks are also under pressure, with the CSI 1000 Index experiencing a decline of over 6.6% in the same period.

As the market continues to adjust, the broad-based fund ETF favored by long-term investors has once again become the "money-absorbing" star. Several leading products have seen a significant increase in trading volume in the final stages of trading for two consecutive days, indicating that funds are clearly entering the market through this channel.

On October 16th, during the last 20 minutes of trading in the A-share market, the CSI 300 ETF managed by Huatai-PineBridge saw a sudden surge in trading volume, with a single-period turnover of 12.562 billion yuan. This pushed the daily turnover to 16.093 billion yuan, representing a 1.4-fold increase from the previous trading day and setting a new high since the end of July.

Almost at the same time, the Shanghai 50 ETF Huaxia showed synchronous movements at the end of trading. During this period, 4.347 billion yuan was traded, exceeding the daily volume of the previous day; the total trading volume for the whole day reached 5.101 billion yuan, setting a new high in nearly five months. At the same time, the turnover rates for both products doubled compared to the previous period.

This is not an isolated incident. Just the previous day, E Fund's CSI 300 ETF witnessed a similar scenario, with transactions exceeding 17.3 billion yuan in the last half hour of trading, pushing the daily turnover to over 19.4 billion yuan, a more than 22.6-fold increase from the previous trading day, setting a new high since February of this year; the turnover rate soared from 1.61% to 38.8%, breaking the historical record for this ETF.

On the same day, the trading volumes of Huaxia Sci-Tech Innovation 50 ETF and E Fund GEM ETF also exceeded 10 billion yuan, reaching 14.046 billion yuan and 12.16 billion yuan respectively. The former saw a month-on-month increase of 133%, while the latter's growth rate exceeded 90%. The trading volumes of products such as CSI A500ETF and SSE Index ETF also doubled.

Looking at the entire market, the overall trading volume of broad-based indices ETF has increased simultaneously. Data from Wind shows that on October 15th, the trading volume of broad-based indices ETF across the market reached nearly 114 billion yuan, an 82% increase from the previous day's 62.8 billion yuan, with over 80% of broad-based indices ETF seeing higher trading volumes on a month-on-month basis; on the 16th, the trading volume did decline slightly, but still reached 90.9 billion yuan, and there were 20 products with a single-day trading volume of over 1 billion yuan.

Looking at the long term, the surge in trading volume at the end of the session is just like the waves on the surface; the capital flow beneath the water has been ongoing for some time already. Data from Wind shows that as of October 16th, funds have been flowing into the stock-based ETF product market for 13 consecutive trading days, accumulating a total of over 180.3 billion yuan, making it one of the main sources of incremental capital in the market.

On October 15th alone, the stock fund ETF saw a net inflow of 46.9 billion yuan, reaching a new high since late August. Together with the 26.2 billion yuan on the 16th, the total net inflow amounted to 73.1 billion yuan. The broad-based fund ETF contributed over 90% of the capital, with a two-day total net inflow of 68.1 billion yuan.

The capital aggregation effect of top products is particularly evident. Index products tracking the CSI 300 saw a net inflow of over 38 billion yuan. The net inflows for E Fund's CSI 300 ETF and Huatai-PineBridge's CSI 300 ETF were 19.4 billion yuan and 16.4 billion yuan respectively. The former recorded a net inflow of 18.8 billion yuan on October 15th, while the latter received 13 billion yuan in net subscriptions on the 16th, both setting new daily net inflow records for the past year.

Products such as the GEM Index and the Sci-Tech 50 Index are also the focus of this round of capital inflows. On the 15th and 16th, there was a total net inflow of over 8.7 billion yuan, with the Sci-Tech 50 ETFs, including Huaxia and E Fund's GEM ETF, seeing an increase of over 6.8 billion yuan each. Meanwhile, the SSE 50 ETFs (Huaxia), SSE Index ETF (FGO), CSI 500 ETF (Southern), and GEM ETF (GF) all saw an additional capital inflow of over 1 billion yuan each.

Beyond the flow of funds, what the market is more concerned about is whether this increase in trading volume indicates a bottom signal.

From historical experience, when broad-based indices such as ETF are publicly announced by large institutional funds to be bought for the long term, there is often a sudden increase in trading volume and a continuous rise in net inflows during market adjustments, which typically correspond to temporary bottom periods in the market. Therefore, this recent movement has also sparked widespread discussion in the market about major funds entering to support the market.

However, it should be noted that compared to previous rounds, there are certain differences in aspects such as the volume of transactions and net inflow for this round of ETF. For example, on July 20th of this year, the transaction volume and net inflow were 151.6 billion yuan and 59.1 billion yuan respectively, both of which are higher than those of this round.

A person from the fund industry believes that the continuous inflow of large amounts of capital, which is focused on the top products of the core broad-based index ETF, as well as the trading pattern of concentrated volume at the end of the session, are consistent with the operational characteristics of large institutional funds using broad-based indices ETF for reverse allocation. Compared to directly purchasing a basket of constituent stocks, ETF naturally suits large amounts of capital. Choosing top products such as the CSI 300 ETFs inherently carries the significance of stabilizing the market.

"Large funds increase their equity allocation through core broad-based indices, sending a positive signal to the market, which helps to repair short-term market sentiment and improve risk appetite," said a person in equity investment research from North China who holds a similar view. However, he also emphasized that the market-stabilizing actions of large funds only affect the slope of the overall market trend and do not change the direction; subsequent changes in market trends will still depend on fundamental expectations."

"Since 2024, whenever the Shanghai Composite Index quickly pulls back below key levels, ETF has seen continuous net inflows," said Meng Lei, equity strategy analyst at UBS Securities China, to Yicai. This month, the trading volume of the main broad-based index ETF in the A-share market has rapidly increased.

During the same period, another front of financial activity was also underway, with multiple listed companies sending positive signals to investors through substantial financial contributions. Wind data shows that as of October 18th, since October 15th, 127 listed companies have disclosed plans for share repurchases or recent progress in this regard, with over 40% of these companies coming from technology sectors such as electronics, communications, computers, and power equipment.

For example, in the communications sector, Gao Guangrong, the chairman of Xinyisheng, proposed to repurchase between 800 million and 1 billion yuan using its own funds or raised capital. In the electronics sector, Sun Chengsi, the chairman of Baiwei Storage, proposed to repurchase between 200 million and 250 million yuan. In addition, Tianfu Communications and Lanqi Technology, which are popular targets, have also made similar statements.

ETF Volume increase, net capital inflow, and intensive repurchases - does the combination of these three factors indicate that the market bottom is near?

"The superficial trigger for this round of adjustments comes from overseas, with the dominant factor being on the funding side, namely the clearing of positions and the rebalancing of funds under the existing stock situation," a researcher from Great Wall Fund told Yicai. Currently, the market lacks incremental funds, and the focus is on competition among existing players. The concentration of holdings and trading in the technology sector has been relatively high in the earlier stages."

He further analyzed that against the backdrop of external disruptions and the approaching verification period for the third-quarter reports, leveraged funds and institutional funds simultaneously reduced their leverage and sought to realize profits. Although passive funds such as ETF were able to absorb some of this demand, their capacity was limited, leading to a negative feedback at the trading level that amplified the extent of adjustments.

In the view of those interviewed, the transmission chain of this round of adjustments can be summarized as follows: rising overseas interest rates served as the trigger, the overcrowding and clearance of existing funds were the main cause, and the marginal weakening of industry narratives acted as a catalyst; however, the industry trend and profitability have not reversed. Under this chain, the downside risks for the market are relatively limited, but for a sustained rebound, it is still necessary to have a combination of market momentum and policy signals.

"A-share earnings are still in an upward cycle." In Meng Lei's view, the main reason for the recent weakness in the A-share market is different from the cooling of the global tech narrative and rapid deleveraging in July. The short-term correction is more due to investors' concentrated release of previously high trading congestion in the tech sector.

"More than half of the current chips have been cleared," said a researcher from Great Wall Fund. With a significant reduction in leveraged funds, ETF and insurance funds have begun to take on positions against the trend, so the potential for further significant market declines may be relatively limited. However, the recovery of risk appetite requires a catalyst, and in the short term, the market is more likely to maintain a weak consolidation pattern with structural rotation.

Jin Dailai, a macro strategy researcher at the Equity Research Department of Golden Eagle Fund, told Yicai that after consecutive adjustments, there is a need for short-term technical recovery in the market. However, the divergence between overseas AI financing and returns has not yet been resolved, and the extent of domestic profit improvement remains to be verified. It is expected that the market will mainly experience fluctuations for consolidation and structural rotation in the short term.

"The key to whether the recovery can continue lies in whether core technologies can stabilize, whether trading volumes can effectively increase during upward trends, and whether the third-quarter reports can lead to an upward revision of profit expectations," she further stated. In the medium term, she maintains a balanced investment strategy, focusing on the certainty of profits and defensive properties in the short term, and selectively paying attention to opportunities for technological recovery where prosperity matches valuation levels.

In terms of short-term operations, Long Jiangwei, the fund manager of Hengsheng Qianhai High-End Manufacturing Hybrid Fund, suggests paying attention to three aspects: First, as we are about to enter a period of intensive disclosure of third-quarter reports, the pressure to fulfill performance expectations may intensify fluctuations in high-valued growth sectors; second, the further developments in the domestic policy toolbox, including MLF, LPR, and the pace of fiscal efforts; third, the transmission of fluctuations in overseas markets to risk preferences.

Leading stocks such as ChangXin Technology and 'Yi ZhongTian' have been actively engaged in share repurchases.

The following is a summary of some important announcements by Yicai, for reference by investors.

The growth rate of basic research funding was 5.1 percentage points higher than that of R&D funding.

Among the 1,241 stocks in the TMT sector, 800 stocks hit new lows for the past 20 days at the close on October 11, accounting for 64.5%; of these, 112 stocks continued to set new 20-day lows at the close on the 12th.

On September 29th and 30th, the total trading volume across the market hit new lows for the year in a row. The Shanghai Composite Index fell below 3,900 points, while the GEM Index and the Sci-Tech 50 Index just experienced their worst quarters in their respective histories.