Over the past two months, a significant shift has occurred in the landscape of public fund issuance within China's financial markets, transitioning from the dominance of bond funds to a resurgence of index fundsThis rapid change indicates a broader sentiment and strategy shift among investors, pointing to evolving market dynamics that could influence future investment decisions.

After a four-month hiatus, the issuance of public funds has once again exceeded the remarkable threshold of one billion yuan in a single monthAccording to data from Wind, a total of 98 new funds were established in November, accumulating an impressive issuance scale of 147.4 billion yuan.

This surge in fund issuance is primarily driven not by the popular bond funds that previously held sway earlier in the year, but rather by the increasingly favored index funds that have ascended as the prime choice for investorsA closer examination reveals that 61 of the new funds launched in November were index funds, collectively raising 120.6 billion yuan, which represents an astounding contribution of 81.8 percent to the total issuanceAmong these, four bond index funds managed to secure an issuance scale of 16.9 billion yuan.

Interestingly, taking into account only the equity index funds—excluding those bond index funds—this represents the first month in which the capital raised via equity index funds has surpassed one billion yuanThe remarkable accomplishment of this milestone is largely attributed to the "CSI A500" series of index funds, which collectively brought in 96.6 billion yuan through 31 products, with seven of these funds managing to raise over 5 billion yuan each.

During the first nine months of the year, the principal drivers of fund issuance were bond funds, which accounted for over 65 percent of the total scale each monthParticularly in June, bond funds thrived, achieving a staggering issuance figure of 152.5 billion yuan, representing 87.1 percent of new fund issuance

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This sharp contrast to the current trends is particularly illustrative of the rapid changes that can occur within the market.

The shift in investor sentiment can be largely traced back to specific policy changes, particularly following the implementation of the “924” policy, which prompted a pronounced rebound in the A-share market, motivating a capital transition in favor of equities.

However, as October rolled in, the issuance of new funds met a sudden stagnation, marking record lows for both the number of new funds established and the total raised capital within the yearSeveral relevant factors contributed to this lull: the lengthy week-long break for the National Day holiday, the immediate pressure investors felt to enter the market after the holiday, and the period of market adjustment following the A-share index hitting a new year-high on October 8.

A detailed analysis reveals the emergence of a “see-saw” effect between equity and bond funds during this timeThe number of new bond fund establishments plummeted to single digits, raising only 13.5 billion yuan—amounting to 40.5 percent of total issuanceConversely, equity funds managed to surpass bonds for the first time this year.

Furthermore, this trend is reflected not only in new issuances but also in the performance of existing fundsRecent data disclosed by the Asset Management Association of China indicated a decline of 700.1 billion units in bond fund shares, contrasted by an upturn of 71.4 billion units in equity fund shares.

By November, equity fund issuance experienced a remarkable rebound, raising over 100 billion yuan—107.4 billion yuan to be precise, which accounted for 70.9 percent of total new fund issuanceWhile bond fund issuance did recover to 37.5 billion yuan, this still marked its lowest share of the year at a mere 25.5 percent.

As December began, a new wave of market optimism emergedOn December 2, both equity and bond markets experienced an auspicious start, commonly referred to as "opening red." All three major indices in the A-share market saw significant gains, with the Shanghai Composite Index rising by 1.13 percent, closing at 3,363.98 points

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Similarly, the Shenzhen Composite Index and the ChiNext Index posted increases of 1.36 percent and 1.42 percent, respectivelyNotably, over 4,600 individual stocks in the market rose, evidencing widespread bullish sentiment.

The bond market mirrored this vigor, as evidenced by collective gains among treasury futuresThe primary contract for the 30-year treasury saw an increase of 0.77 percent, reaching a high not seen since the end of September, while the yield on ten-year government bonds dropped below 2 percent, achieving the lowest point since April 2002. Industry analysts compared the bond market’s performance to the A-share market reclaiming the 3,500-point mark.

In analyzing the persistent decline in the ten-year treasury yield, experts from Wanji Fund attributed the immediate catalyst to two self-discipline initiatives that establish a market interest rate pricing mechanism and came into effect on December 1. These initiatives are poised to contribute to a decline in the interest rates on interbank demand deposits as well as corporate deposits, ultimately alleviating banks’ pressure on interest margins and reducing overall financing costs.

Additionally, the customary positioning for year-end trading has also emerged as a key driving force behind the current decline in interest ratesHistorical patterns show that bond yields tend to decrease in December over the past five yearsGiven this historical tendency and the prevailing assets scarcity, market investors are inclined to take a bullish stance.

Looking ahead, Wanji Fund holds a positive outlookThey posit that the considerable liquidity present in the market relies upon substantial fiscal expenditures anticipated in December, in conjunction with the likelihood of a reserve requirement ratio (RRR) cutPast practices during year-end and early-year periods indicate that this segment typically witnesses a surge in assets allocation activitiesTherefore, the existing scarcity of investment options is unlikely to change significantly, and investor demand for allocations is expected to persist, supporting the bond market.

However, in terms of the equity market, analysts at Morgan Stanley suggest that the current flexibility of the market is largely driven by retail investor sentiment

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