Date：January 12, 2015
Source: China Securities Journal

The stock market led by weighted stocks fully activated the bulk market. The turnover of the bulk market gained a rapid increase since July 2014. December, the month that witnessed a fastest rise of index, was also the month when bulk transaction was the most active, with the turnover reaching RMB74.964 billion, or a 73.81% growth compared with November. The bulk transaction in 2014 was different from the past when bulk transaction of small-and-medium cap stocks tended to have a stronger performance. This time, the bulk transaction of large cap stock was stronger than that of small-and-medium cap. The turnover of large cap weighted stocks ranked top 10 and their discount rates were much higher than the average. This trend will last in this year, which reflects that the preference of capital remains to focus on large cap blue chips.
Bullish index makes bulk transaction “hot” as volume in December reaches record high
According to Wind data, a total of 11,063 bulk transactions were done in both Shanghai and Shenzhen stock market in 2014, with an average discount rate of 4.97%. A total of 37.052 billion shares were transacted with a value of RMB364.907 billion, a 41.21% growth compared with RMB258.411 billion in 2013.
According to the bulk transaction data in 2014, the bulk market’s performance is closely connected to stock index. It bears 2 features: first, it was at a low position before rising; second, it had a positive correlation with the stock index in the second half of 2014.
On one hand, the trend of bulk transaction in 2014 followed that of Shanghai Composite Index. In the first half of 2014, the Shanghai Composite Index swung within a narrow band; the stock index fell 3.2% in the first half of 2014; in the second half, the Shanghai Composite Index had a 57.92% rise due to the bull market of stock index. For bulk transaction, the total turnover in the first half of 2014 reached RMB113.559 billion and it had a sharp rise in the second half of 2014, with the lowest turnover in a month in the second half of 2014 surpassing the highest turnover in a month in the first half of 2014, reaching RMB251.347 billion in total, which doubled when compared with that in the first half of 2014.
In the meantime, the transaction reached at a premium price in the second half of 2014 also had a sharp increase compared with that in the first half. 1,186 out of 1,699 of these transactions were reached in the second half of 2014, accounting for nearly 70% of the total.
On the other hand, after the beginning of a bullish market of stock index, there was a positive correlation between bulk transaction market and the monthly trend of Shanghai Composite Index. When the stock index started to become bullish, the number of bulk transactions and their turnover experienced a sharp increase from 892 transactions with a turnover of RMB22.534 billion in June to 1,491 transactions with a turnover of RMB53.588 billion; when the Shanghai Composite Index’s increase rate fell from 6.62% in September to 2.38% in October, the number of transactions and turnover in October also dropped to 680 transactions with a turnover of RMB24.95 billion; when there was a short squeeze in stock index in November, the bulk transaction also started to become all the more active.
What’s worth noticing is that there were 1,739 bulk transactions in both Shanghai and Shenzhen stock markets in December 2014, with a turnover of RMB74.964 billion, a record high in a single month in 2014. It saw a great increase of 73.81% compared with November. Moreover, the turnover of bulk transaction in December 2014 also had a 50% rise, surpassing the annual turnover in 2009.
According to professionals, the active status of bulk transaction market tends to bear a positive correlation with stock market by reviewing the past records of bulk transaction. This is because, on the one hand, that shareholders would prefer to sell part of their shares in a bullish market to get an ideal profit, and this would not have a negative impact on stock price; on the other hand, if financial institutions hold a positive attitude to the market in the future, they would prefer to buy shares through bulk transaction platform. The reason why they choose this channel is that it is difficult to buy sufficient shares in the secondary market, and that the shares traded in bulk transaction platform have no limitations on lock-up period, and the trading fee is much lower, which will enable institutions with good negotiating skills to have larger space for arbitrage.
“60”-started blue chips led by financial stocks march toward bulk transactions
The bulk transaction in 2014 also showed the feature of focusing on large cap stocks. No matter it is 2014 or December alone, the stocks with huge turnovers were mainly large cap blue chips.
Take December 2014 for example, stocks with top 10 turnovers in that month were all financial stocks, including Founder Securities, China Merchant Securities, Minsheng Bank and Everbright Securities, and their average discount rate was only 0.16%, which was much higher than the average level of December (-5.09%). 4 out of 10 transactions were done at par price and 2 at premium price. The highest one is Everbright Securities, with a premium rate as high as 10.02%, and the transaction with most discount rate is Minsheng Bank, yet its discount rate is just -3.43%.
From the industrial perspective, sections with top-ranking turnovers in December are non-banking finance, bank, non-ferrous metal, electronic equipment and computer. Among them, the accumulated turnovers of non-banking finance and bank sections in December reached RMB8.657 billion and RMB7.965 billion, and they became the only 2 sections with total turnovers accounting for over 10% in a single month, and these 2 sections in the secondary market also had significant growth in December.
This trend continued in the first week in 2015. On the first trading day in January 2015, top 5 bulk transactions are Industrial Bank, SPD Bank, Haitong Securities, Zhongnan Construction and Gemdale Group, which were all large cap blue chips and fell into such sections as SWS Bank, non-banking finance and real estate. The discount rate of these 5 transactions was only -1.28%, much higher than the average rate of -5.55%. This was an indirect reflection that there was no fundamental change of the preference of capital and the situation led by large cap blue chips would remain with support from capitals.