The National Day holiday is coming to an end, and the A-shares market is about to open. The widespread rally before the holiday has filled investors with anticipation for the upcoming market trend.

However, some investors have complained that during the sharp rise in the stock market before the holiday, the stock funds they held could not keep up with the market, resulting in smaller gains.

"The slowest to break even in this wave are public funds, specifically those with active equity," said one investor on an internet communication platform.

Since the "9·24" new policy and subsequent policy measures to support economic and stock market development were introduced, the Shanghai Composite Index has achieved five consecutive days of gains, with a cumulative increase of over 21% in five trading days; the Shenzhen Component Index and the ChiNext Index have also risen by 10.67% and 15.36%, respectively. Almost all sectors have seen significant increases, with more than 30 industry ETFs (Exchange-Traded Funds) such as Securities ETF, Liquor ETF, and Semiconductor ETF hitting the daily limit.

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Under such market conditions, the average return of active equity funds has not outperformed the Shanghai Composite Index's increase in the past five trading days, and there is a significant performance gap between different products.

According to Wind data, as of September 30, a total of 4,455 active equity funds (including general equity funds, stock-mixed funds, and flexible allocation funds, only including the main code, the same below) in the entire market have seen over 99% of funds rise in the past five trading days, with an average cumulative return rate of 18.70%. Among them, there are 72 funds with gains exceeding 30%, and 2,055 funds with gains exceeding 20%, accounting for 46% of all active equity funds in the market. However, overall, among these funds, the highest cumulative return rate in the past five trading days reached 37.98%, while the lowest was -1.03%, with a nearly 40% gap between the top and bottom performers.

Among these funds, some products have missed out on the market trend due to the fund manager's conservative strategy, which previously opted for low or empty positions, and the market has risen too quickly recently; some products, on the other hand, have seen a significant increase in performance recently, but due to previous large declines, the "holding experience" for investors is still not satisfactory.

Stock market rises, funds fall

Under the "fast bull" market trend, a small number of active equity products still perform poorly, even showing negative returns.

According to Wind data, in the past five trading days, there are a total of 44 active equity funds with negative returns. Among them, the fund with the largest decline is Penghua Hongshang A, which has lost money on four out of the last five trading days, with a cumulative decline of 1.03%.Penghua Hongshang A's "missing out" on the market may be due to its choice to hold no equity assets and heavily invest in the bond market. The fund's latest semi-annual report for 2024 shows that its stock market value accounts for 0%, bond market value accounts for 70.18%, and other assets account for 16.09% of the total fund assets.

Typically, "other assets" in fund investments mainly include assets generated from investments in other financial derivatives such as options and futures.

A public fund research and investment professional indicated that the rapid rise in the stock market has made the seesaw phenomenon between stocks and bonds very pronounced, with both the bond market and hedging strategies' options experiencing不同程度的下跌. Judging from the net value performance of this product, it is possible that the fund manager did not significantly adjust the strategy.

Guolian Xin Qi Dian A also "missed out" on this round of the market. As of September 30th, the unit net value of the fund was 0.96 yuan. According to the fund's disclosed semi-annual report for 2024, its stock market value accounted for only 27.02%, cash accounted for 65.26%, and bond assets accounted for 7.62%.

In addition, Huaan Xin Heng Li A and Harvest Xin Qu Shi A are also at the bottom of the "missed out" round of the market, with cumulative losses exceeding 0.55% in the past five trading days.

Economic Observer Network found that among these 44 actively managed equity funds with negative returns during the period, the vast majority are flexible allocation funds, which mainly allocate bonds and cash in asset allocation, with some also allocating options, etc.

Moreover, many new funds may have missed the pre-holiday market due to not having time to establish positions. For example, six funds established in September this year, including Huaan Jing Qi Return A, Bank of China Cycle Selection A, Neuberger Berman Resource Selection A, and Wanjia Technology Quantitative Stock Selection A, have all shown a slight decline in the past five trading days.

A person related to a fund company in Shanghai said, "Before the '9·24' market, some fund managers were more pessimistic about market sentiment and performance, especially fund managers of flexible allocation funds who have no restrictions on equity positions, reducing the allocation ratio of the fund's stock assets or even holding no stock assets. However, the market reacted too quickly to the policy, and these funds did not have time to make significant adjustments, resulting in not being able to 'catch' the rise of this round of the market."

Can the market continue to rise?

Although the market has generally risen, there are still investors complaining about why the market has risen so well, and the funds they hold are still in a predicament of being trapped or losing money.In response to this, the aforementioned fund company insiders believe that this is due to the fact that after the net value of the fund falls, a larger increase in net value is required to return to its original position. They stated that the calculation formula for the fund's recovery to breakeven is: Recovery to breakeven amplitude = 1/(1 - loss percentage) - 1. For example, when an investor incurs a 50% loss, the recovery to breakeven amplitude = 1/(1 - 50%) - 1 = 100%. This means that when the fund purchased by an investor incurs a 50% loss, it needs to rise by 100% to break even.

"Precisely because a 50% loss requires a 1-time increase to break even, even if the market arrives and the fund's net value also shows a certain increase, the investor's holding experience is still that it falls quickly and rises slowly."

A senior market participant believes that because some fund managers chose to issue new funds at the high points of the bull market in previous years, a significant portion of the trapped investors are from that period, having experienced several years of losses. Currently, the net value of some funds is still around 40 or 50 cents, and it still requires a sustained market to break even.

Regarding investors' concerns about how the market will perform after the holiday and whether the market will continue, Economic Observer Network interviewed multiple institutions and found that some institutional personnel were still working overtime during the National Day holiday, with market research, telephone roadshows, and other work continuing non-stop.

According to a message from the State Council Information Office, the State Council's press office will hold a press conference at 10 a.m. on October 8, 2024 (Tuesday), inviting Director of the National Development and Reform Commission Zheng Shanjie and Deputy Directors Liu Sushe, Zhao Chenxin, Li Chunlin, and Zheng Bei to introduce the situation related to "systematically implementing a package of incremental policies to solidly promote the economy to move upwards, structure to be optimized, and development momentum to continue to improve," and answer questions from journalists.

Morgan Stanley believes that if the Chinese government announces more spending measures in the coming weeks, the stock market may rise by another 10% to 15%. The expectation of further increasing fiscal expansion has returned to the table, allowing investors to view China from a reflation perspective for the first time in a long time.

On October 7, CITIC Securities Research Institute stated that there has been a significant change in policy signals, and market expectations have undergone a major reversal. Future continuous increases in domestic demand policies may drive price signals to arrive earlier, and the market will usher in a major turning point. After the major reversal of expectations, the market will continue to experience pulse-like increases in the short term, characterized by the concentrated entry of incremental funds led by retail investors. Currently, we are in the transition phase from the major reversal of expectations to the major turning point of the market. With low P/B and domestic demand repair as the core, once the price signal is confirmed, the market will usher in a major turning point and will initiate an annual-level bull market characterized by the core feature of the credit cycle moving upwards again.

Hua Jin Securities stated that the current market rise is still in its infancy, and the current rise is still in its infancy, mainly driven by significant positive policies and external events. In terms of policy, it is highly likely to continue positively in the short term: first, the overall tone has already turned positive, which may lead to credit bottoming out and thus cause A-share valuation repair; second, the specific policy direction and intensity are very clear, enhancing the expectation of economic repair, and thus the valuation of the A-share market is highly likely to be repaired. In terms of external events, the global liquidity easing cycle has begun after the Fed's rate cut. The risk of short-term friction between China and the US is small, and the core determinant of the rebound entering the medium term is the fundamentals, which may be repaired later. In terms of external negative events and valuations, the short-term risk is not significant.