SMIC (688981.SH)'s indicative announcement of domestic stock changes on February 28 shows that China SSE Science and Technology Innovation Board 50ETF reduced its holdings of SMIC 1.6921 million shares on February 26, and still holds SMIC 0.196 billion shares after the reduction, accounting for 9.94 per cent of SMIC's total domestic share capital and 2.47 per cent of the company's total share capital.

Prior to the reduction, Huaxia SSE 50ETF held 0.198 billion shares of SMIC, accounting for 10.03 of SMIC's total domestic share capital and 2.49 of the company's total share capital.

Huaxia SSE 50ETF Fund Share and Size Daily Change Source: Wind

Wind data shows that on February 26, the fund shares of China SSE Science and Technology Innovation Board 50ETF decreased by 0.59 billion from the previous trading day. SMIC is the fund's number one heavyweight stock and is a passive reduction in the event of a significant net redemption of shares.

Recently, the share of Huaxia SSE 50ETF has declined day by day, falling 9.69 billion shares from February 5 to 28.

At present, there are eight SSE 50 ETFs on the market (excluding the index and feeder funds), of which four were established in the first batch.

Table: Kechuang 50ETF Details, Data as of February 28 Source: Wind

At present, China SSE 50ETF has the largest scale. As of February 28, the fund share is 98.8 billion, with a scale of 79.92 billion yuan, accounting for more than half of the total size of the above 8 funds. The fund's latest reported holder structure shows that institutional investors hold 36.01 per cent and individual investors hold 63.99 per cent.

During the month, Efonda SSE's 50ETF was bought in more than 7 billion shares. The fund's latest reported holder structure shows that institutional investors hold 67.16 per cent and individual investors hold 32.84 per cent.

In September 2023, Efonda Fund, ICBC Credit Suisse Fund and Huaan Fund lowered the management and custody rates of the CRE 50ETF. In December, Efonda cut the fund's combined rate again. Currently, Huaan SSE 50ETF has the lowest combined rate of 0.2 per cent. ICBC Credit Suisse SSE 50ETF and Guolian An SSE 50ETF combined rate of 0.35, the overall rate is at a low to medium level, the monthly share increased by 0.208 billion, 0.914 billion shares.

A head public offering said that ETFs have strong trading properties and share fluctuations are normal. CRE ETFs are one of the popular investment targets, and the focus of funds on ETFs is also affected by size and listing batches. The first batch of CRE 50 ETFs have market opportunities, the size, share of the top ETF liquidity is higher, the market attention is relatively high.

"The investors of the CRE 50ETF are both institutional and individual investors, and the structure of each fund holder is different. It is not ruled out that short-term funds are fast in and out, or individual investors may be safe." The above person said.

Another South China public offering said that among similar broad-based ETFs with basically flat fee levels, large-scale and high-share ETFs are more liquid, making it easier for investors to obtain tradable fund shares. As the size of the fund increases, so does the willingness to allocate funds, which is a breakthrough in the development of broad-based ETFs. In addition, from the perspective of the whole market, institutional funds are the main force of ETFs, and the investment behavior of individual investors is partially affected by institutional funds.

For the reasons for the change in ETF shares, another public offering said that the logic behind it may not only be allocation behavior such as bottoming out of funds and net inflows (out), but also behavior related to short-term sentiment.

"T0" trading between ETFs and stocks is also a factor. When a stock goes up or down, it may not be possible to buy or sell. The ETF redemption mechanism may help investors bypass the limit of ups and downs and buy and sell the corresponding stocks, known as "ETF/stock T0 trading".

specifically, when a stock cannot be bought by the daily limit, investors can first buy the ETF containing the stock in the secondary market, then redeem the ETF to get a basket of stocks (at this time, the ETF share is reduced), keep the daily limit stock, and sell other stocks in the basket. the final result is equivalent to buying the daily limit stock. The opposite is the same.

The impact of ETF share changes on future earnings? Societe Generale Securities research report that the impact of broad-based and narrow-based share changes on future earnings is different. When the share change rate of a narrow-based ETF is "synthesized" into the corresponding primary industry, the "industry share change rate" factor has a clear negative predictive ability for the industry's future returns. The "broad-based share change rate" factor does not have a significant predictive power for future returns on a cross-sectional basis. As a result, Societe Generale speculates that there may be different "main pushers" behind the share changes in broad-based ETFs and narrow-based ETFs, such as different trading motives or investor structures.