According to a report from Hong Kong Wande Communications, the latest quarterly report on public funds shows that the scale of public funds has reached a new high, surpassing 31 trillion yuan. The scale of stock ETFs has significantly exceeded that of active stock funds, becoming an important tool for investing in A shares. Rise of passive long positions In the past three years, passive funds represented by ETFs have shown explosive growth. According to Wind data, as of the end of the third quarter of 2024, the total scale of stock ETFs and cross-border ETFs has exceeded 3 trillion yuan. The stockpile scale of the CSI 300 ETF has exceeded 1 trillion yuan, an increase of 14.23% from the previous period. A research report by Guotou Securities stated that prior to 2019, China's ETF market was in its early stages of development, with various types of ETF funds gradually improving, but overall scale expansion was slow until October 2020, when the ETF asset scale surpassed 1 trillion yuan. However, after 2020, the ETF market entered a soaring mode, taking only three years to go from 1 trillion to 2 trillion yuan. While active equity investment entered a cold winter in 2022, the development of passive investment markets accelerated. In addition to the booming broad-based ETFs, various industry-themed ETFs and cross-border ETFs have also been popular among investors. Investors increase their positions in A shares through ETFs This year, due to policy support and market demand stimulation, the market has bounced back, resulting in a continuous increase in the market value of A shares held by public funds. By the end of the third quarter, the market value of A shares held by public funds increased rapidly by 23.37% to 6.19 trillion yuan, the highest since 2022. Investors have frequently increased their positions in A shares through ETFs, with stock ETFs receiving over 500 billion yuan in net inflows in the third quarter, providing incremental funds to A shares. Since the sharp rise on September 24, there has been a huge increase in incremental inflows into A-share ETFs. From September 24 to October 8, a total of 241.1 billion yuan in net inflows was received by ETFs tracking the A-share index, indicating that the rise of passive investment is not caused by cyclical forces, but by more explicit and strong structural drivers. The new "Nine Principles" put forward explicitly aim to vigorously promote the entry of medium and long-term funds into the market and continuously strengthen long-term investment capabilities. The recent joint issuance by the Central Financial Office and the China Securities Regulatory Commission of the "Guiding Opinions on Promoting the Entry of Medium and Long-Term Funds into the Market" stated that after some efforts, the scale and proportion of medium and long-term fund investments have significantly increased, making the structure of capital market investors more rational. A500ETF is becoming a new favorite in the market As the first core broad-based index after the release of the new "Nine Principles", on October 15, the first batch of CSI A500ETFs were listed, with 43 off-exchange index funds applying collectively on that day. On October 18, 25 of these products were approved quickly. On October 25, 20 products, including 10 CSI A500ETF linked funds, 9 CSI A500 ordinary index funds, and 1 CSI A500 index-enhanced fund, were sold out first. On October 26, Taikang Fund announced the early closure of its CSI A500ETF linked fund. TF Securities stated that the listing of CSI A500ETF not only provides investors with more investment choices but also signifies the further maturity of the Chinese capital market. As a low-cost, highly transparent investment tool, ETFs will greatly promote the popularization of mainstream investment concepts, integrate the capital market with the global market, and enhance market efficiency and participation. With more institutional investors entering the market, the activity and depth of the A-share market are expected to increase, pushing the overall development of the market and forming a more diversified investment ecosystem. TF Securities believes that in terms of the types of investors participating in CSI A500ETF, the participation of institutional investors will help stabilize market sentiment and reduce investment risks in small-cap stocks. Compared to retail investors, institutional investors conduct more in-depth research and make more informed judgments about the market, which may lead to a more rational market and reduce speculative behavior. In addition, as more institutional investors enter the market, the sensitivity and awareness of information in the market will increase, leading to improved pricing efficiency in the entire market.