A-share version of HALO hot-bought, power grid equipment ETF "only seedling" grows from 3 billion to 30 billion in just two months. Which other ETFs have "higher HALO content"?

Looking to invest in HALO assets? Which ETFs are worth buying? The shift of funds toward heavy assets may be signaling something.

Since Goldman Sachs released a related research report last month proposing the “HALO” investment strategy, the HALO effect in the capital markets has emerged. But what exactly are HALO assets? Furthermore, which ETFs have a higher “HALO” content?

Since March, ETF capital flows show significant inflows into themes like power grid equipment and oil & gas ETFs. As the market adjusted last week, sector performance diverged, but ETFs with high “HALO” content continued to attract funds. In addition to industry-themed ETFs, free cash flow ETFs and dividend ETFs have also seen sustained buying, with market attention on their HALO asset weights.

Typical HALO for Both Up and Down Markets

The HALO theme corresponds to assets with low risk of AI replacement, resilience against technological shocks, and long-term stability in uncertain environments driven by AI technology. China International Capital Corporation (CICC) summarized these assets into two main categories: one is the typical HALO sector; the other is AI “displacer” assets.

Further analysis by CICC indicates that in the A-share market, typical HALO sectors are mainly concentrated in the upstream and midstream. In energy and raw materials, sectors like energy metals, chemical products, chemical raw materials, coal mining, and oil & gas extraction show clear HALO characteristics. In manufacturing, sectors such as power, shipping ports, railways, highways, airports, and power grid equipment have fixed assets accounting for over 30%, with asset density measured by tangible assets/revenue ranking high in the industry, and ROE and cash flow being relatively stable.

The military industry, with high technical barriers and natural product manufacturing plans, has stable orders and cash flows, and holds strong strategic value, making it another key HALO domain.

Since March, ETF flows show that as of March 16, a total of over 2 billion units have been net subscribed across 12 index-tracking ETFs, with 7 related to typical HALO sectors. Among these, the China Securities (CSI) Power Grid Equipment Index ETF has seen the largest net subscription (47.55 billion units).

Currently, only the Huaxia Power Grid Equipment ETF tracks this index within the market, attracting a large influx of funds. In less than a month, this ETF has surpassed the 100 billion yuan mark, reaching 330.15 billion yuan on March 16. Since last week, despite a correction in the power grid equipment sector, this ETF continued to attract funds, with total fund units reaching a new high of 16.75 billion.

Looking at longer-term data, according to Choice, Huaxia Power Grid Equipment ETF has attracted 26.46 billion yuan this year alone, leading all ETFs in the market. Its size has consecutively broken through 10 billion, 20 billion, and 30 billion yuan, increasing more than sevenfold.

Similarly, the Hang Seng A-shares Power Grid Equipment Index ETF has seen net subscriptions of 2.358 billion units since March. The top ten holdings in both the CSI Power Grid Equipment Index and the Hang Seng A-shares Power Grid Equipment Index overlap in seven stocks, but their weights differ. Choice data shows that the CSI index has a slightly higher proportion of power equipment at 77.29%, compared to 71.31% for the Hang Seng A-shares index.

ETFs tracking the CSI All Share Electric Power & Utilities Index have also seen significant net subscriptions, totaling over 2.6 billion units since March.

The strong inflows into power and grid-related ETFs are driven not only by the utility nature of these sectors but also by the core infrastructure for AI computing power—benefiting from the exponential growth in AI computing demand and policies supporting “computing and electricity” synergy.

Beyond power, traditional energy remains a recognized investment direction within the HALO strategy. Since March, ETFs tracking the GuoZheng Petroleum & Natural Gas Index have received a total of 3.666 billion units in net subscriptions, with both Penghua Fund and Invesco Great Wall Fund’s Petroleum ETF each net subscribing over 1 billion units.

ETFs tracking the China Securities Rare Metals Index, China Securities Industrial Nonferrous Metals Index, and China Securities Oil & Gas Industry Index have also collectively received over 2 billion units in net subscriptions in March.

AI “Displacer” Capital Flows Diverge

Regarding AI “displacer” assets, CICC highlights two main directions: first, the acceleration of technological breakthroughs in global AI industries driving demand for hardware such as computing power and semiconductors; second, upstream resource commodities that serve as main raw materials for AI industry chain construction, benefiting from rapid growth in computing power demand, with strategic and non-renewable characteristics, and less affected by technological shocks.

However, overall ETF capital flows related to these sectors are mixed. For example, Penghua CSI Chemical Industry ETF has been net redeemed by 2.649 billion units since March, making it the second-largest net redemption after Hong Kong Stock Connect internet ETFs. The Southern CSI Shenwan Nonferrous Metals ETF has also been redeemed by over 600 million units. Conversely, ETFs like the Jiashi Green Power ETF and Guotai CSI Semiconductor Materials & Equipment ETF have seen significant net subscriptions since March.

It is worth noting that ETFs covering multiple HALO strategies, such as free cash flow ETFs, remain popular. The ETF tracking the CSI Free Cash Flow Index has received 3.437 billion units in net subscriptions since March, and related ETFs tracking the CSI Cash Flow Index have also accumulated over 1 billion units in net subscriptions.

In terms of industry weights, petroleum and petrochemicals account for over 10% of the CSI Cash Flow Index and the CSI Cash Flow Index, respectively. The weights of nonferrous metals and electrical equipment are also prominent. The Dividend Low Volatility Index’s weights are more concentrated in banks and similar sectors, with less overall inflow, but still continuous net fund inflows since March.

The ongoing capital inflows, combined with market performance, show that although the total number of market-wide ETFs over 10 billion yuan has decreased by 7 to 140, several ETFs in the HALO sector have returned to or newly reached the 10 billion yuan scale. Besides Huaxia Power Grid Equipment ETF, ETFs like Guotai Semiconductor Equipment ETF, Yongying Satellite ETF, Huaxia Free Cash Flow ETF, and Huaxia Nonferrous Metals ETF have doubled in size this year.

(Source: Cailian Press)