Nearly 20 Mutual Funds Adjust Valuation Methods for Guotai Junan, Haitong Securities
With the brokerage sector seeing a significant rise, nearly 20 fund companies have recently announced adjustments to the valuation methods for Guotai Junan or Haitong Securities held in their funds.
Several industry insiders have stated that such valuation adjustments are designed to better protect the interests of investors, ensuring that the net value of fund products can timely and accurately reflect the asset conditions. At the same time, this is also part of the risk control of fund companies, ensuring that the operation of funds is more transparent and fair.
Nearly 20 public funds have announced adjustments to the valuation methods for suspended stocks in a cluster.
Recently, the A-share market has shown a significant recovery. Since Guotai Junan and Haitong Securities were suspended on September 16, the brokerage index has risen by more than 10% in just six trading days. With the market surge, nearly 20 public funds have announced adjustments to the valuation methods for these two suspended stocks in the past two days.
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Today (September 26), Tianhong, CITIC-Prudential, Dongwu, Rui Da, Jiahe, Guorong, Tongtai, and other fund companies simultaneously issued announcements stating that, in accordance with the "Guidance on Securities Investment Fund Valuation Business" by the China Securities Regulatory Commission (hereinafter referred to as the "Guidance") and other relevant regulations, the company, after consultation with the fund custodian, will adopt the "index return method" for the valuation of the suspended stock "Guotai Junan (Code: 601211)" starting from September 25, 2024. The company will take into account various relevant influencing factors and consult with the fund custodian. Once the aforementioned stock resumes trading and its transactions reflect the characteristics of an active market, the valuation will revert to using the closing price on the day, and no further announcement will be made at that time.
In addition, Minsheng Jiayin Fund also announced the use of the "index return method" for the valuation of the stock "Haitong Securities (Code: 600837)" held by the company's funds (excluding ETF funds).
Yesterday, more than 10 public funds disclosed the valuation adjustments for some of their funds. Among them, Yifangda, China Merchants, Bosera, China Merchants, Harvest, Guotai, Penghua, Changxin, Shenwan Lingxin, and Tibet Dongcai and other fund companies announced that starting from September 24, 2024, the company will use the "index return method" for the valuation of "Haitong Securities" and "Guotai Junan" held by its securities investment funds (excluding ETFs).
Furthermore, Yifangda Fund considered the adjustment factors for Guotai Junan and Haitong Securities in the valuation of its China Securities Comprehensive Index Securities Company ETF Linked Fund, CSI 300 Non-Bank Financials ETF Linked Fund, and the target ETF held by China Merchants Fund's ETF Linked Fund, based on the net value of shares on the same day.
Wind data shows that as of the first half of this year, public funds held Guotai Junan and Haitong Securities (including A and H shares) accounted for 6.24% and 8.64% of the circulating shares, respectively, and showed varying degrees of increases in the second quarter.
Among the fund companies holding the highest proportion of Guotai Junan A shares, Guotai Fund and Huabao Fund held 1.43% and 0.92% of the circulating shares, respectively. Among the fund companies holding the highest proportion of Guotai Junan H shares, Yifangda Fund held a high proportion of 2.39% of the circulating shares.Among the top fund companies holding Haitong Securities A-shares, Guotai Fund and Huabao Fund hold a proportion of circulating shares of 2.58% and 1.65%, respectively. Nanfang and Tianhong Funds hold a proportion of circulating shares around 0.5%. Among the top fund companies holding Haitong Securities H-shares, Yifangda Fund holds a proportion of circulating shares as high as 1.91%.
Haitong Securities and Guotai Junan are important components of the securities theme index funds and the CSI 300 index funds. Looking at individual fund products, Guotai, Huabao, Nanfang, and Tianhong's China Securities ETF, Yifangda's CSI 300 Non-Bank ETF, and others hold a leading number of shares.
In addition to ETFs, in actively managed equity funds, as of the public mutual fund report for the second quarter of 2024, the products holding Guotai Junan in the forefront include Wanjia Interconnected China Advantage Quantitative Strategy, Huatai Baorui Quantitative Driving, Bank of China Value Selection, and Guotai Quantitative Strategy Income. The products holding Haitong Securities in the forefront include Bank of China Xingli Steady Return, Penghua Selection Group of Heroes One-Year Hold, and Guotai AnYi. However, the number of shares held by actively managed equity funds is not high.
Valuation adjustments aim to protect investor interests. According to the relevant provisions of the "Notice on Stock Valuation Index of China Securities Investment Fund Industry Association," for suspended stocks, each fund management company should fully assess the impact of changes in the economic environment after the stock is suspended and the impact of specific matters of the listed company on the stock price. If the potential valuation adjustment has an impact on the net value of the fund's assets on the previous valuation date of more than 0.25%, it should be adjusted according to the provisions of the "Guiding Opinions."
Many industry insiders have said that, in general, the adjustment of valuations for suspended stocks by fund companies is to better reflect the latest market assessments, protect the interests of investors, and ensure that the net value of fund products can reflect the asset status in a timely and accurate manner. Investors should carefully analyze the related risks and potential returns when considering such funds.
"Recently, due to the significant increase in the securities index, especially after Guotai Junan and Haitong Securities were suspended, the fund's valuation of these stocks did not reflect the market changes in a timely manner, leading to a significant discount between the fund's net value and the true net value. In order to control risks and protect the interests of investors, fund companies have begun to adjust the valuation methods to ensure that the fund's net value can reflect the asset status in a timely and accurate manner. After the suspended stocks resume trading or the valuation is adjusted, investors may obtain a higher capital appreciation due to the fund's price returning to the true net value," said a Beijing equity product fund manager.
A Shanghai equity investment director pointed out that special valuation adjustments for held stocks usually occur when the held targets are suspended for a long time and generally apply to heavily held stocks by funds. If timely valuation adjustments are not made, there may be a significant deviation between the net value of the fund product and its actual value, posing a potential risk of redemption arbitrage and the risk of treating different investors unfairly. The aforementioned investment director warned that, generally speaking, valuation adjustments for held stocks should consider the two aspects of "timely and reasonable" to reduce arbitrage risks. When the target stock resumes normal trading, it is also necessary to control the scale and risk exposure of the target in a timely manner.