6.7 Billion in Large Fund Shift: Power Grid Equipment ETF Sees Strong Buying Interest While Oil and Gas Sectors Face Selloff

A-shares market experiences a “double-edged sword” style of large-scale capital reallocation.

With the update cycle of global power grids and the explosive growth of AI computing power, the power grid equipment sector has attracted a surge of funds. As of the close on March 12, 12 ETFs related to the power grid equipment index saw a net inflow of over 6.7 billion yuan in the past week due to subscription and redemption activities. Meanwhile, 10 ETFs involving the oil and gas index experienced a total outflow of approximately 6.7 billion yuan.

“Currently, the market is not experiencing a full-scale capital exit during the oscillation and adjustment, but rather showing significant structural rebalancing and multi-directional deployment,” said a trader. This “in-and-out” pattern precisely reflects that the market is in a style consolidation period. Investors should focus on the order fulfillment capacity of the power grid equipment sector and whether the oil and gas sector will present medium-term value after a correction.

Leveraging ETFs to Snatch Up Power Grid Sector

As market expectations for the construction of new power systems heat up, funds are rushing into the power grid equipment sector through ETFs.

According to First Financial, on March 11 alone, the Huaxia Power Grid Equipment ETF (159326.SZ) saw a net inflow of 722 million yuan from subscription and redemption activities, accumulating a total inflow of 3.5 billion yuan over the past week, with a latest scale of 34.3 billion yuan, ranking among the top ETFs in this category.

Over the past month, leading net inflows from subscription and redemption include Guotai Fund’s Power Grid ETF (561380.SH), Huatai-PineBridge Power ETF (561560.SH), GF Fund’s Power ETF (159611.SZ), and E-Fund’s Power Grid Equipment ETF (560390.SH), with inflows of 3.62 billion yuan, 1.43 billion yuan, 1.409 billion yuan, and 955 million yuan respectively.

In terms of scale, the latest sizes are approximately 6.7 billion yuan for Guotai Fund’s Power Grid ETF, 6 billion yuan for GF Fund’s Power ETF, 2.48 billion yuan for Huatai-PineBridge Power ETF, and 9.98 billion yuan for E-Fund’s Power Grid Equipment ETF.

Regarding the outlook for the power grid equipment sector, Guoxin Securities analysts note that the State Grid Corporation’s investment plan of up to 4 trillion yuan during the 14th Five-Year Plan period is gradually becoming clear. Major projects such as ultra-high voltage and flexible direct current transmission will accelerate, and the super-long-term special bonds in 2026 will focus on supporting energy and power infrastructure upgrades.

On the other hand, the explosive growth of AI computing power presents new challenges and opportunities for the power grid. E-Fund analysts believe that AI-driven increases in electricity consumption will lead to a need for grid upgrades worldwide, especially in Western countries. China’s power grid equipment companies are seizing this opportunity to expand overseas, with order volumes and price centers rising in tandem, supporting a positive outlook for the industry’s fundamentals and demand.

According to China Academy of Information and Communications Technology estimates, in 2023, China’s data center electricity consumption will be about 150 billion kWh, accounting for roughly 1.6% of total social electricity use. With the rapid growth of AI, by 2030, China’s data center electricity consumption could exceed 700 billion kWh, representing about 5.3% of total social electricity use.

Industry enthusiasm is soaring, and the net asset value of the power grid index funds has increased significantly. The Huaxia Power Grid Equipment ETF has gained over 40% year-to-date, while GF Power ETF and Huatai-PineBridge Power ETF have each risen over 20%. Analysts caution that the sustainability of this upward trend remains to be seen. Rapid capital inflows often lead to short-term trading congestion, and future sector performance will depend on order execution and macro liquidity conditions.

Oil Price Rollercoaster, Sector Funds Profit-Taking

While funds are rushing into power equipment, the previously strong-performing oil and gas sector is clearly “losing blood,” with capital accelerating outflows from related ETFs.

According to First Financial, Guotai Fund’s Oil ETF (561360.SH) experienced the largest net outflow in the past week among similar products, with 3.6 billion yuan leaving. Major funds in the Penghua Oil ETF (159697.SZ), Invesco Oil ETF (159588.SZ), and Huatai-FTF Oil & Gas ETF (159309.SZ) also saw accelerated outflows, with net outflows of 1.652 billion yuan, 491 million yuan, and 414 million yuan respectively.

Analysts believe that the decline in the oil and gas sector is a profit-taking move after early gains, with the market having already priced in geopolitical premiums. After oil prices surged, major players chose to lock in profits. Additionally, the current market style favors technology growth and new productivity, leading to a clear capital shift under stockpile competition.

Recently, oil prices have also been highly volatile.

On March 11, the International Energy Agency (IEA) announced that 32 member countries agreed to release 400 million barrels from strategic reserves, yet oil prices did not fall but instead rose on March 12. Industry experts expect that the large fluctuations in oil prices are far from over.

Since March, geopolitical conflicts have caused intense volatility in the international crude oil market. On March 9, Brent crude futures soared to nearly $120 per barrel, and WTI also reached similar highs. However, after the spike, prices quickly retreated, with the maximum intra-day fluctuation exceeding 40% within just two trading days.

Morgan Stanley Fund Research’s Sun Renjie believes that geopolitical conflicts act as catalysts, amplifying structural supply-side contradictions in the oil market. Even if conflicts ease due to various constraints, geopolitical risk premiums will be slow to dissipate. Under the long-term trend of restrained upstream oil and gas capital expenditure and decreasing resilience of traditional fossil fuel supply, the asset value of oil sector companies is likely to be re-evaluated.

Sun notes that upstream oil and gas producers with rich resource reserves will directly benefit from rising oil prices, while integrated refining giants with cost control advantages are also worth attention in a high-price environment.

“Overall, the escalation of conflicts has led to a decline in global risk appetite, with funds shifting from high-valuation growth stocks to defensive sectors like high-dividend, cash-flow-stable utilities and power,” said Li Hao, fund manager of the CSI All-Index Utilities ETF. Meanwhile, recent conflicts in the Middle East have heightened global energy security concerns, prompting countries to accelerate energy independence initiatives, which also supports the domestic power grid, ultra-high voltage, and renewable energy sectors, potentially benefiting power equipment and grid construction sectors.

(Source: First Financial)