Public Fund Active Allocation: Full of Confidence

Since the A-share market reached 924 in the last year, the mid-term pessimistic expectations in the market have begun to improve significantly. Entering 2025, especially with the "early-year AI new technology DeepSeek 1.0" + "military technology DeepSeek 2.0 moment" + "innovative drugs DeepSeek 3.0 moment," market confidence has been continuously strengthened. Combined with "national subsidies + new consumption supporting retail recovery" + "export resilience" + "the negative impact of real estate gradually nearing its end," the mid-term pessimistic expectations have been systematically reversed, and the market has gradually begun to align with a more positive and confident mindset in the second quarter.

In fact, since the 407 golden pit was realized, the market index has been "stronger than expected." We believe the fundamental reason lies in the support of the proactive credit creation theory + the optimistic improvement of mid- to long-term pessimistic issues. The former primarily points to the contribution of banks to most of the index's gains this year, while the latter indicates the continuously strengthening confidence in the transformation of old and new driving forces. It can be observed that in 25Q2, the positions of active funds increased by 0.21 percentage points to 84.25%, and the holding structure correspondingly favored broad technology (with AI at its core) + large finance (with banks at its core) as the leading directions for increased holdings in the second quarter.

Among them, the basic meaning of the so-called "new" in the transformation of old and new driving forces is: 1. New trend: Hong Kong stocks are expected to gradually become China's new core assets; 2. Going overseas will become a new decisive factor for the growth of the A-share market; 3. New technology: A-share hardware technology (AI, semiconductors, military industry, innovative drugs) + Hong Kong stock software technology (internet + intelligent driving); 4. New model: A new era of consumption investment centered around the new consumption 50 combination. This point is fully validated in the holding direction of active public funds in the second quarter of 2025:

1. Based on the frequency analysis of keywords in the second-quarter reports of representative active public funds, AI + technology remains the main battlefield, while new consumption, going overseas, and innovative drugs have also been mentioned multiple times in the second-quarter fund perspectives.

2. From the A/H perspective, the number of heavily weighted stocks and the proportion of heavy-weight market value in Hong Kong stocks held by active public funds in 2025Q2 have continued to rise, with the current proportion of Hong Kong stock holdings approaching around 20%.

3. From the perspective of industrial trends, the current new broad AI industry wave is replacing the previous new energy (vehicle) industry wave. In 2025Q2, the proportion of TMT + Hang Seng Technology holdings in institutional allocations has reached 36.19% and shows a continuous trend of increasing positions, while broad new energy is in a process of continuous reduction.

4. From the perspective of new and old consumption, there is a shift from traditional consumption to new consumption, with the current holding proportion of the new consumption 50 combination further increasing to 10.36%. Meanwhile, technology + going overseas 50 + new consumption 50 have become new core assets.

5. Based on the narrative of the transformation of old and new driving forces, the holding proportion of the new economy + TMT index continues to rise, while the holding of the old economy index is currently only 9.46%, reflecting that the logic of the transformation of old and new driving forces in the A-share market has become a consensus for institutional allocation In summary: Currently, the market index will continue to maintain a strong position under the state of "banks setting the stage, and the bulls performing." Structurally, based on the theory of active credit creation, liquidity will gradually spread from absolute undervaluation to relative undervaluation, showing a historical pattern where banks rise first, followed by non-banks, and then technology and undervalued large-cap growth stocks. We repeatedly emphasize that the excess returns of relatively undervalued large-cap growth stocks will rebound. The ChiNext Index will benefit from valuations below the historical 30th percentile and performance growth and trends that dominate the broad-based index, potentially becoming the most rewarding direction; at the same time, considering that the CSI A500 Index has a more compatible distribution of industry leaders, it has also become an important allocation direction worth considering.

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Author of this article: Lin Rongxiong, Peng Jingtiao, Source: Lin Rongxiong Strategy Salon, Original title: "[Guotou Lin Rongxiong Strategy] Public Fund Active Allocation: Full of Confidence"

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