Capital flow encounters earnings season: Has the core broad-based allocation window opened?

Ask AI · How Does Earnings Season Change the Pricing Logic in China’s A-Share Market?

Since the start of the year, China’s A-share market has gone through a correction, and ETF funds tracking large-cap indexes have continued to flow out. However, after entering March, the direction of fund flows changed noticeably— the outflow rate sharply slowed, and at one point even turned into net inflows. Meanwhile, in April, earnings season arrived as scheduled, and the market’s pricing logic is shifting from “sentiment-driven games” to “earnings verification.” With these two signals overlapping, they point to a trend: the allocation window for core broad-based index funds is quietly opening.

Table: March fund flows of core broad-based index ETFs: outflows decline, and some turn into inflows

Data source: Wind, as of March 31, 2026.

I. Capital-flow signals from size indexes— from “decisively exiting” to “gradually returning”

From the start of the year to date, the ETF fund-flow data for size indexes shows a clear month-by-month deceleration trend. In January, overall outflows from size indexes exceeded 1 trillion. Daily outflows in the hundreds of millions are also not uncommon. But in February, that figure dropped sharply to RMB 87.9 billion. In March, it narrowed further to RMB 64.6 billion— more than a 94% reduction compared with January.

The more critical signal appears in the weekly data: in the first two weeks of March, size indexes saw outflows of RMB 39.4 billion and RMB 25.8 billion. Then in the third week, they turned net positive for the first time, with net inflows of RMB 8.95 billion. Although the fourth week still saw a small outflow, compared with the bleeding pace of tens of billions at the start of the year, it is a world of difference.

Among these, the performance of the CSI 300 Index is especially prominent. In the third and fourth weeks of March, the index continuously received net inflows of funds, at RMB 6.54B and RMB 3.81B respectively, leading the way in signaling stabilization. The STAR Market 50 also performed remarkably well: in March, it saw overall net inflows against the trend, totaling RMB 4.83B, ending the ongoing outflows of the previous two months. In the third and fourth weeks, it recorded inflows of RMB 2.36 billion and RMB 1.82 billion respectively.

Figure: Fund flow trends for size-index ETF funds since 2026 (unit: RMB 100 million)

Data source: Wind, as of March 31, 2026.

Figure: Industry indexes showed an outflow trend in March; size indexes showed an inflow trend (unit: RMB 100 million）

Data source: Wind, as of March 31, 2026.

Historical experience suggests that when the outflow slope of size indexes shifts from steep to gradual— or even turns positive on a weekly basis— it often means that long-term capital has already begun to take positions in the opposite direction.

At the same time, looking at the performance of industry indexes, the rotation speed across Shenwan first-level industries in March accelerated markedly week by week. The industries ranking near the top in weekly returns are not always the same, and the number of industries that record positive returns each week remains consistently small. This pattern of rapid rotation and a concentrated “winning effect” in only a few industries makes it significantly harder to achieve stable returns by betting on a single industry. Such a market environment also indirectly confirms the relatively better value-for-money of broad-based indexes in terms of risk diversification and capital capacity efficiency, serving as yet another footnote to how funds use broad-based ETF allocations.

Table: In March, industry rotation was fast, and few industries recorded positive returns each week

Data source: Wind, as of March 31, 2026. Industry selection: Shenwan first-level industries.

II. As Earnings Season Arrives— from “Trading Expectations” to “Looking at Results”

In April, China’s A-share market officially enters the concentrated release period for annual reports and first-quarter reports. This is the moment within the year when companies “turn in their report cards” on fundamentals. Before earnings season, market pricing relied more on expectations, themes, and sentiment. With earnings season arriving, the pricing logic gradually returns to the most fundamental dimension: earnings.

For ordinary investors, faced with thousands of listed companies, analyzing each company’s reports one by one and selecting individual stocks comes with extremely high information and analysis thresholds. At this point, the advantages of broad-based ETFs become evident: they already bundle together the most representative leading companies from each industry.

Historical data repeatedly verifies a rule: during the earnings disclosure window, the performance of large-cap broad-based index funds tends to outperform mid- and small-cap or pure theme-based assets. The reason is not difficult to understand— in the CSI 300, STAR Market 50, and ChiNext Index, the constituent stocks are largely leading companies within their sectors or leaders in specific sub-sectors. Their businesses are more mature, their financials more transparent, and their earnings stability is relatively stronger within the same segment. Under the “earnings verification” lens, these assets are more likely to win investors’ favor.

When marginal capital flows begin to return and earnings season provides verification of performance, the allocation value of core broad-based index funds gains double support. On the capital side, long-term capital has started to gradually return, especially in the CSI 300 and STAR Market 50, which have received net inflows for multiple consecutive weeks— to a certain extent indicating that “smart money” is moving into position early. On the fundamentals side, earnings season will strengthen the premium for leading companies’ “earnings competitive advantage.” Broad-based ETFs, as a one-click tool to bundle high-quality assets, align perfectly with the allocation needs of this stage. In summary, with marginal capital flows returning and the earnings verification window opening during earnings season, the allocation value of core broad-based index funds is worth paying close attention to.

III. How to Capture This Window Using Broad-Based ETFs?

Based on the logic above, we can focus on several broad-based ETF products with different styles— corresponding to different targets: the CSI 300 ETF from E Fund for large-cap blue chips, the Csi A500 ETF from E Fund for industry-balanced coverage, the STAR Market 50 ETF from E Fund for focusing on hard technology, and the ChiNext ETF from E Fund for covering emerging leading firms.

(I) E Fund CSI 300 ETF (510310): the “stabilizing weight” for large-cap blue chips

1. Product features

The CSI 300 Index covers the 300 A-share companies with the largest size and best liquidity, representing core A-share assets. The E Fund CSI 300 ETF has a fund size of over RMB 100 billion and stands out for liquidity advantages, making it suitable as a core holding for an investment portfolio.

2. Current allocation logic

Apart from the net capital flow shift and earnings-season catalyst mentioned earlier, the valuation pressure on the CSI 300 is gradually easing. As of the end of March, the CSI 300 Index’s price-to-book (P/B) percentile has fallen from 61.75% at the end of 2025 to 42.75%, placing it at a historically mid-to-low level. Over the past decade, the price-to-earnings (P/E) percentile has also fallen to 76.72%, reflecting some digestion compared with the start of the year. In addition, the trend of economic recovery provides support for China’s A-share outlook going forward. In February, China’s industrial enterprise profit data showed strong performance: cumulative year-on-year growth of 15.2%, reflecting increased resilience in domestic industrial production. As an index that covers leading companies across industries, the constituent stocks of the CSI 300 are expected to benefit from marginal improvements in the macroeconomic environment.

Figure: “Strong opening” for industrial enterprise profit growth in 2026

Data source: Wind, as of March 31, 2026.

(II) E Fund A500 ETF (159361): a “China-version S&P 500” with industry balance

1. Product features

The CSI A500 Index, compiled by CSI Index Company, reflects an important benchmark index for tracking the overall performance of China’s A-share market. Its core strategy uses industry balance: it selects 500 securities with large market caps and good liquidity from each industry as samples, aiming to comprehensively reflect China’s economic structure and the overall performance of the A-share market. The reason CSI A500 is suitable for long-term allocation lies in the fact that its index-construction logic better aligns with the direction of high-quality economic development. It achieves dual coverage of core A-share assets and specific sub-industries, bringing together leading firms from various sub-sectors, with strong earnings quality and growth potential.

2. Current allocation logic

Under the current backdrop of short-term market volatility and declining risk appetite, the allocation logic of CSI A500 is mainly reflected in three aspects: first, its industry-balanced sample selection effectively controls single-industry weight, dispersing the impact of volatility from specific sectors on the portfolio; second, its constituent stocks have strong profitability and steady operations, providing baseline downside protection; third, the index broadly covers leading companies in both the CSI 300 and CSI 500, making it suitable for equity core-holding allocation. This reduces the difficulty of industry and style selection, and helps investors share the market’s long-term growth in a relatively balanced manner.

Table: Comparison of financial indicators between CSI A500 and CSI 300 indices

Data source: Wind, as of April 3, 2026; ROE data as of the 3rd quarter report of 2025

(III) E Fund STAR Market 50 ETF (588080): a “high beta” choice for hard technology

1. Product features

The STAR Market 50 Index covers the 50 hard-technology leading companies with the largest market caps and best liquidity on the STAR Market. The weight of the electronics industry exceeds 60%, and semiconductor leaders are highly concentrated. “High growth, high beta” is its most distinctive label. The E Fund STAR Market 50 ETF has a fund size of over RMB 30 billion and offers excellent liquidity.

2. Current allocation logic

In March, the STAR Market 50 Index declined, but the E Fund STAR Market 50 ETF attracted net inflows of RMB 903 million against the trend. In the previous week alone, it saw net inflows of RMB 939 million. This phenomenon of “buying more when it falls” to a certain extent reflects investors’ recognition of the long-term value of the technology sector. The current mid- to long-term main theme of AI computing power and domestic substitution has not changed. During earnings season, the earnings performance of relevant leading companies may become a catalyst for the next round of market activity.

Figure: Industry distribution of the STAR Market 50 Index

Data source: Wind, as of March 31, 2026; industry classification: Shenwan first-level industries.

(IV) E Fund ChiNext ETF (159915): a “valuation repair” opportunity for growth leaders

1. Product features

The E Fund ChiNext ETF closely tracks the ChiNext Index, and it is the #1 fund by scale among ETF-linked products. The ChiNext Index covers 100 growth leading enterprises on the ChiNext board with large market caps and good liquidity. The weights are concentrated in high-growth sectors such as power equipment, communications, and electronics, offering relatively high upside elasticity in a bull market.

2. Current allocation logic

The biggest advantage of the ChiNext Index lies in valuation. As of the end of March, its PE percentile was only 34.94%, at a historically low level. This means that compared with its own historical valuation, today’s price has substantial room for valuation repair. The directions covered by the index’s constituent stocks— such as energy storage, optical communications, and AI computing power— are tightly linked to long-term industrial trends like energy transition and artificial intelligence. During earnings season, earnings verification may become a catalyst for valuation repair.

Figure: Industry distribution of the ChiNext Index

Data source: Wind, as of March 31, 2026; industry classification: Shenwan first-level industries.

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