Market sentiment shifts suddenly! Funds are now focusing on broad-based ETFs.

Ask AI · Does capital switching imply a return to fundamental investment strategies?

When the hardest asset - gold - consecutively fell below $4500, $4400, $4300, $4200, and $4100 in a single day, a sense of panic seems to be spreading.

Aside from oil and gas, global assets have begun a indiscriminate sell-off.

Oil and gas have become the hottest direction in the market, with the premium rates of related funds soaring.

The secondary market prices of on-exchange index funds such as Southern Crude Oil LOF, Harvest Crude Oil LOF, and Crude Oil LOF E Fund are significantly higher than the net asset values of the funds, with the S&P Oil and Gas ETF from Harvest and the S&P Oil and Gas ETF from Vanguard showing obvious premiums.

The aforementioned fund companies have densely issued risk warnings and taken suspension measures, warning that buying at high premiums may face significant losses.

Just as crude oil funds are in high demand, ETF funds are quietly switching from “sector themes” to “broad-based indices.”

The A-share market has seen a sharp decline for three consecutive days, indicating that many investors have cut their losses, but a batch of large-cap funds has chosen to go against the trend.

As the US-Iran conflict enters its fourth week, the adjustment in A-shares has approached the level of last April’s “global equivalent tariff day.”

On Monday, the Shanghai Composite Index briefly fell below 3800 points, closing down 3.63% for the day, marking the third largest single-day decline since the “924” market, only behind the decline on October 9, 2024 (-6.62%) and April 7, 2025, during the equivalent tariff period (-7.34%).

After three consecutive days of adjustment, the Shanghai Composite Index fell a cumulative 6.15% from March 19 to March 23, nearly matching last year’s massive single-day decline.

History is always astonishingly similar. When the degree of adjustment and panic sentiment closely resemble last year’s “tariff bottom,” funds have once again chosen the same direction - bottom-fishing in broad-based ETFs.

On March 23, the ETF market saw a net inflow of 19.062 billion yuan, with only stock ETFs receiving significant bottom-fishing capital.

Specifically, the broad-based index ETFs have once again become the ballast for stabilizing A-shares, with a strong single-day “capital absorption” of 15.6 billion yuan, in stark contrast to the sharp reduction of 12.2 billion yuan in the margin trading market.

Looking closely, the CSI 300, Shanghai Composite Index, SSE 50, and STAR 50 have become the main capital absorbers. The CSI 300 ETFs from Huaxia, Huatai-PB, E Fund, and Harvest, as well as the CSI 1000 and STAR 50 ETFs from Southern and Huaxia, collectively saw a net inflow of nearly 12.5 billion yuan.

(This article contains objective data information and does not constitute any investment advice.)

In fact, this trend had already begun to emerge last week.

Data shows that the industry theme ETFs that have been continuously strong in capital absorption since “924” saw a net outflow of 26.2 billion yuan last week; while broad-based index ETFs finally welcomed a positive capital flow, with a weekly net inflow of 9.078 billion yuan, marking the first continuous buying since a significant reduction in mid-January this year.

Looking at the direction of capital outflow, segmented chemicals, CS rare metals, segmented non-ferrous metals, and SSH gold stocks - previously popular thematic ETFs - are encountering profit-taking.

What does this rare switch from “sector themes to broad-based indices” signify?

On one hand, risk appetite is declining. The capital is withdrawing from the highly speculative sector theme ETFs and shifting towards broad-based indices that track the leading quality companies across all market sectors, indicating a market shift from “speculating on themes” back to “focusing on fundamentals.”

On the other hand, demand for safe-haven assets is rising. The heavily weighted sectors like the CSI 300 and SSE 50 are regaining capital support, which may indicate that some funds are buying in.

For instance, the net inflow for the CSI 300 ETF from Huatai-PB, the SSE 50 ETF from Huaxia, the SSE Index ETF from Vanguard, the CSI 500 ETF from Southern, the STAR 50 ETF from Huaxia, and the CSI 1000 ETF from Southern totaled 27 billion yuan.

Industrial Securities believes that as the external disturbances gradually weaken their impact on A-shares, the market will focus more on earnings periods, such as prosperous technology, overseas chain products, and price increase chain products.

Currently, the global focus is on when the Middle East conflict will signal an end.

However, unlike last year’s “global equivalent tariffs,” the end of a trade war often relies on a piece of agreement, which can be easily achieved; whereas once a real war starts, its conclusion is not determined unilaterally.

Last night’s US-Iran negotiations serve as the best example. President Trump claimed that both sides had “productive dialogue,” while Iran denied any direct talks with the US.

In a mere 56 minutes, two social media messages caused the volatility of the US stock S&P index to reach $3 trillion. In such a high-volatility moment, betting on short-term trades is akin to playing with fire.

The Strait of Hormuz remains closed, missiles are still roaring in the Middle East, and US Marines are advancing rapidly. No one knows if the war will end by April 9; the authenticity of news is as indistinguishable as falling snowflakes, and the candlestick charts are bouncing wildly.

Before the geopolitical conflict clarifies, popular thematic investments are changing rapidly, and some funds are starting to position in broad-based ETFs, which may be another choice to cope with the current high-volatility market.

Historical data show that broad-based indices, as the “barometer” of the economy, will trend upwards in the long run with economic growth.