In recent weeks, the Shanghai Composite Index has exhibited a pattern of peaks and retreats, raising concerns among investorsThe sentiment in the market has been chaotic, particularly as funding flows indicate a notable outflow from stock ETFs, particularly amongst those linked to innovative technology sectors, such as the Science and Technology Innovation Board, as well as growth-oriented indices like the ChiNext Board and the CSI 500. This trend of withdrawal signals a grim outlook for these broad-based ETFs.

Last Friday, as the main market indices were adjusting, a mysterious influx of funds emerged, facilitating significant transactions through ETFsFor instance, the trading volume of the CSI 300 ETF and the Shanghai 50 ETF saw a remarkable increase

According to statistics, the total net inflow into stock ETFs this year has reached an impressive 347.7 billion yuan, solidifying broad-based ETFs as the primary vehicle for capital attraction amidst a shaky market.

Looking ahead, analysts from various institutions suggest that the market will likely continue to experience a period of volatility marked by varying levels of performance across different sectorsThe upcoming quarterly reports from listed companies are likely to highlight significant financial pressures, which may contribute to a climate of uncertainty regarding fundamental economic metrics.

The pattern of increased volume in broad-based ETFs has become a recurring theme, which merits further investigation.

From March 18 to 22, the market underwent a repetitive cycle of rises and falls, causing key indices to exhibit mixed results

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Specifically, the Shanghai Composite Index reached a temporary peak of 3,090.05 points on Tuesday before entering a phase of consolidation, ultimately closing down nearly 1% by FridayThis marked a slight weekly decline of 0.22%, hindering its consecutive five-week upward trendSimilarly, the Shenzhen Composite Index followed suit, peaking at 9,785.10 points on Tuesday before tapering off to a weekly decline of 0.49%.

On the same day last Friday, upon market correction, significant trading volumes were recorded again as “mystery funds” made entry via ETFsThe turnover for the Huatai-PB CSI 300 ETF surpassed 5 billion yuan on that day, well above the previous day’s total, while the turnover for the Huaxia Shanghai 50 ETF reached an impressive 3.57 billion yuan, a substantial increase from the prior day’s 1.5 billion yuan turnover.

When examining individual ETFs, the Huatai-PB CSI 300 ETF broke 14 billion yuan in weekly turnover, while the Huaxia Hang Seng Technology ETF topped 12 billion

Additionally, other notable ETFs including the Huaxia Shanghai 50 ETF and the Huaxia Shanghai Science and Technology Innovation Board 50 ETF, all surpassed 10 billion in weekly trading as well.

Historically, in January, when the market was adjusting, there was a marked uptick in buying power targeted at key broad-based ETFs, notably the CSI 300, indicating a robust attraction towards these financial instruments, amidst a broader negative market sentiment.

As the ETF market evolves in recent years, broad-based ETFs have attracted significant capital, with many important indices facing explosive buying activityHistorical data shows that by March 24, the total net inflows into equity ETFs across the market have reached a noteworthy 347.7 billion yuan this year alone, with the top eight stock ETFs collectively attracting an astounding 340.9 billion yuan, representing a remarkable 98% of the inflows.

However, last week saw over 15 billion yuan pulled out from stock ETFs, indicating a significant shift in investor sentiment.

Analyzing the financial flow into stock ETFs during the previous week, it became evident that the volatile market conditions led to an abrupt and significant net outflow of capital.

According to data compiled by Wind, over 800 stock ETFs in the market (including cross-border ETFs) have management scales exceeding 1.4 trillion yuan, with net outflows amounting to a striking 15.622 billion yuan

This contrasts sharply with the prior two weeks, during which net inflows were recorded at -11.386 billion yuan and 34.127 billion yuan respectively.

In terms of indices tracked, products following the K-Tech 50, ChiNext Index, CSI A50, K-Tech 100, ChiNext 50, and CSI 500 experienced the most significant net outflows last weekThe most notable net outflows were reported by the E-Fonda ChiNext ETF, Huaxia Shanghai Science and Technology Innovation Board 50 ETF, Huashan ChiNext 50 ETF, and Huatai-PB CSI 300 ETF, each exceeding 1 billion yuan in net withdrawal, cumulatively surpassing 8 billion yuan.

As funds exited the market, certain ETFs experienced a decline in scale, particularly those exceeding the billion yuan mark

Comparatively, the Huatai-PB CSI 300 ETF, Huaxia Shanghai 50 ETF, and Huaxia CSI 300 ETF demonstrated reduced scale when juxtaposed with two weeks prior.

On a more positive note, the second largest in scale, the E-Fonda CSI 300 ETF, managed to maintain its footing despite the tumult, registering a net inflow of over 2.2 billion yuan for the week, shrinking the gap with the leader even further.

Furthermore, sectors related to pharmaceuticals, coal, and non-ferrous metals saw strong net inflows, with the Guangfa CSI Hong Kong Innovative Drug ETF and the Guotai CSI Coal ETF each exceeding a net inflow of 500 million yuan per week.

As we project the future market landscape, Yin Hua Fund has remarked that in light of currently lower valuations, the resurgence of northbound capital, proactive macroeconomic policies, and a vibrant industrial environment, the potential for a rebound in A-shares appears promising

However, it is crucial not to misconstrue a comeback to the 3,000 point mark as a definitive market reversal signal; further monitoring of economic improvements will be crucial to gauge the sustainability of the rebound.

Meanwhile, Bosera Fund indicated that the data continues to validate a persistent recovery in the Chinese economyAlthough the real estate market remains relatively weak, supportive policies for the real estate sector are being consistently implementedAs these policies' effects manifest, the economic drag is expected to diminishThe influence of international uncertainties on A-shares is also perceived to be waning, indicating a stronger dependency on economic recovery trajectories moving forwardAs the upward momentum of A-shares gradually subsides, a broad oscillation pattern could characterize the market in the short term.

Dacheng Fund concluded that the market is gradually transitioning to a feedback loop propelled by improved macro expectations and replenishment of micro-level funds, which could sustain a continuous positive drive for the market