中国资金流月度报告：流动性环境持续支持，但未来压力上升

in May, though rising pressure aheadEquityStrategy Launching the monthly product China Flow Lens China demand indicators in China's equity market. The report aims to provide a structuredframework to assess evolving liquidity conditions and their trading implications. Patrick Pan, CFA >>Research AnalystMerrill Lynch (Hong Kong) A better capital supply/demand mix for A-sharesOverall, liquidity conditions continue to favor A-shares over Hong Kong equities. While +852 3508 4601patrick.pan2@bofa.comWinnie Wu>>ResearchAnalvstMerill Lynch (Hong Kong) domestic liquidity remains strong and the restock of"national team" capital providesdownside support for A-shares, Hong Kong faces near-term headwinds from slowing southbound inflows, tighter cross-border capital rules, and an upcoming wave of lock-upexpirations.As such,despite faster style and sector rotations since May,we expect A-shares to remain relatively better supported than H-shares in the coming months.Liquidity support in the near term, rising pressures aheadCapital flows to foreign-domiciled China equity funds tracked by EPFR accelerated in +85235083058winnie.wu@bofa.comGina Wu >>StrategistMerrill Lynch (Hong Kong) +85235088008gina.wu@bofa.com May, in line with narrowing UW in China among active EM funds in Apr. At the sametime, China's domestic ETFsoftenusesed bythe“national team"formarket support-continued to see heavy redempticpast month.However,with ETF outflowsYTDalreadyexceedingtheinflcresidual selling pressure could easeinto2H26.inourview.Oner hybrid fund issuances andsharebuybackssupported,liftingADTVto~RMB3.2tn.However,southbound flows to Hong KoranetoutflowofHKD3.6bn (vs.+HKD56.5bn in Apr). On the demexpirationsprojectedat~HKD27Obn in Jul and~HKD40Obn inSepbyWIND-arelikelyto exert liquidity pressure on A-share and Hong Kong markets in the next 3 months.Exhibit 1: Capital supply dynamics still favor A shares vs. Hong Kong stocks ADTV: average daily trading value CGB: China government bondEM: emerging marketImp.: ImpactMLF: Medium-term lending facilityMT: market turnover"National team":state-backedinstitutional investors that step in tostabilize the market during periods ofsharp volatilityOMO:open market operationsOw:overweightPBOC: People's Bank of ChinaSB/NB: southbound/northboundUW: underweight May-26Apr-26 Imp.iHong KongA-share market Trading ideas and investment strategies discussed herein may give rise to significant risk and arenot suitable for all investors. Investors should have experience in relevant markets and the financialresources to absorb any losses arising from applying these ideas or strategies.>> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rules.Refer to"Other Important Disclosuresfor information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions.BofA Securities does and seeks to do business withissuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.Refer to important disclosures on page 9 to 10. Supportive liquidity conditions continueLaunchingthenewproductof ChinaFlowLens We are launching a monthly strategy product to track liquidity dynamics and investor sentiment in China's stock market. By integrating fund flows, positioning,and indicatorsonbothcapital supply and demand,the report offersa structuredframework forassessinghowliquidityandsentimentevolve-andwhatit impliesfortradingdirectionOver thepast decade, fund flow data have shown a strong correlation with Chinaequities, particularly during market reversals triggered by major events. For instance,flows to foreign-domiciled China equity funds turned positive swiftly during the post-COVID reopening in late 2022 and again amid policy easing in September 2024.Exhibit 2: Fund flow data show a strong correlation with China stocks Monthly capital flows to foreign-domiciled China funds (USD bn) vs. MSCI China and CSI 300 indices 2000 Fund flows and market allocation:recovering inflows-but forhow long?Following a slowdown in April this year, capital flows into foreign-domiciled China equity funds, tracked by EPFR, re-accelerated in May, with rolling 4-week net flows to activeChina funds turning positive again after March. By market, both A-share and Hong Kong-focused China funds saw solid inflows. In contrast, funds benchmarking the MSCI ChinaIndex continued to experience redemptions over the past 3 months, albeit at amoderating pace. While EPFR's coverage represents only a relatively small portion of theoverall market, we believe the data still provides a useful indication of the broaddirection of fund flows in the short term. It is also worth noting that heavy redemptions of China's domestic ETFs tracking broadmarket