Several exchange-traded funds heavily held by China's state-backed institutional investors, known as the 'national team,' experienced record outflows on Thursday. Bloomberg Intelligence estimated the group sold approximately $10 billion worth of ETFs that day.
Data compiled by Bloomberg showed the Huatai-Pinebridge CSI 300 ETF saw 20.2 billion yuan ($2.9 billion) leave the fund, the largest outflow since its 2012 launch. Other funds, including the E Fund CSI 300 ETF and ChinaAMC CSI 300 ETF, also recorded their highest outflows.
"It looks like the National Team is selling and making an effort to cool the market down," said Jiang Liangqing, managing director at Zhuhai Greenbamboo Private Fund Management. "While speculation has been rampant and trading excessive in some parts of the market, selling ETFs may still help in cooling that and won't create a conflict of interest."
The selling occurred one day after regulators unexpectedly tightened margin financing rules. Investors largely viewed that step as a tactic to target speculative trades in certain technology stocks.
Bloomberg Intelligence analyst Rebecca Sin noted the national team's largest holdings are in ETFs tracking the CSI 500 and CSI 1000 indexes. She said these are assets capable of triggering an "immediate price shock."
"China's national team has begun to sell ETFs to cool down the equity sector and more selling can be seen this year," Sin said.
On Friday morning, turnover in a basket of eight national team ETFs tracked by Bloomberg surged to 40 billion yuan in the first hour. That was more than double the average full-day level over the past year. The benchmark CSI 300 Index rose as much as 0.9% before paring gains.