The rising impact of domestic mutual funds will continue to drive Chinese stocks  in 2022. Monitoring sentiment and positioning of domestic funds is increasingly important. 

As of end-2021, we estimate there are 6,000+ funds holding equities, with total equity  AUM of CNY8 tn, or 20%+ of A-share free float. Despite a weak 2H21, we estimate that  equity allocations still moved up towards 80% of AUM for funds with equity holdings.

Record equity launches in 2021 amidst a volatile year. 2021 saw an estimated CNY2.2 tn raised across over 1,500 funds, compared to CNY2 tn over 900 new funds in  2020. 2022 has started relatively slowly, but remains above the historical average with  CNY100 bn raised in Jan. Fund flows will be an important gauge of domestic sentiment.