The Chinese Lunar New Year has ushered in a phase of upward movement in the A-share market, creating a renewed sense of optimism among investorsAs investors turn their attention to the latest developments in the financial landscape, insights from recent reports—particularly the fourth-quarter disclosures from various mutual funds—provide valuable signals about the strategic shifts taking place within the marketNotably, despite a context of stable asset growth in public funds, the proactive allocation strategies have recently catalyzed notable increases in specific sectors such as technology and banking, driven by the prospects of high dividends.

The stability in stock positions has not gone unnoticedA key takeaway from the fourth-quarter performance is the observed fluctuation in market valuationsBy the end of September 2024, the market experienced a rapid recovery in valuations, but the upward momentum seemed to stall shortly thereafterAs the market began to correct itself in early November, speculative policies began to take the forefront, leading to a gradual uptick in market activity throughout the quarter.

According to a statistical analysis by Ping An Securities, although there was a slight decline in stock positions among proactive equity funds, figures indicate a median stock position of approximately 89.04% at the end of the fourth quarter, revealing only a modest change from the previous quarterWhen scrutinizing specific fund categories, the median equity positions for ordinary stock, mixed-balance, and high-flexibility allocation funds revealed decreases of approximately 0.62%, 0.95%, and 1.86%, respectivelyThis aligns with a broader trend of net redemptions in equity-focused funds, with a reported withdrawal of 187.5 billion yuan by the end of the quarter, chalking up a significant increase from the previous period.

Overall, the public mutual funds maintained a trajectory of expansion throughout 2024, with total asset values growing incrementally from 34.5 trillion yuan in the previous quarter to approximately 34.8 trillion yuan

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While equity asset scales showed a marginal pullback—from 7 trillion yuan down to 6.8 trillion yuan, representing a 1% decrease in equity's share of total assets—the bond market saw a resurgence, climbing an impressive 5 percentage points to account for 54.2% of the total asset composition.

Particularly of note in recent times has been the evolving landscape of public Exchange Traded Funds (ETFs), which continue to expand in size but at a decelerated growth rateBy the close of the fourth quarter, public ETF assets reached 4.7 trillion yuan, up from 4.5 trillion yuan in the third quarterEnhancements were particularly marked in the stock ETF sector, which saw an uptick in asset values to about 2.8 trillion yuan, overtaking proactive equity funds for the first time as other thematic ETFs focusing on artificial intelligence and semiconductor technologies exhibited notable growth.

The dynamic landscape of the public mutual funds sector is also characterized by a decisive shift towards technology-related sectorsInfluenced by various factors—including industry growth rates and the burgeoning artificial intelligence sector—fund managers have recalibrated their strategiesThe fourth quarter saw proactive equity funds significantly increase allocations in the TMT sector, particularly in electronic and computer-based industries, while also upping stakes in sectors such as automotive, media, and bankingConversely, funding allocations to cyclical and pharmaceutical sectors experienced reductions.

According to Zhang Chi, chief strategist at Guojin Securities, the fourth quarter exhibited a noticeable preference among proactive funds for large-cap technology equities, illustrating a continued inclination towards major companies within that spaceAn analysis by CITIC Securities mirrored these findings, revealing that proactive equity funds increased their stakes in midstream manufacturing while lowering allocations to cyclical sectors—trends that would shape the investment landscape heading into future quarters.

As the fourth quarter progressed, asset allocation trends indicated that while overall stock holdings saw minimal variation, the technology sector gained renewed favor, particularly in electronics

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The rise in the artificial intelligence industry led to increased allocations to computer and media sectors, while renewable energy and banking also played a roleConversely, commodities, pharmaceuticals, and food & beverage sectors experienced marked declines in investment allocationsEstimates suggest that the proactive equity funds' strategies became more diversified, moving away from high concentrations in leading firms.

The A-share market has shown remarkable resilience, adopting an upward trend despite recent correctionsAs reported, key indices surged over consecutive trading days at the start of the Lunar New Year, leading to a collectively positive sentiment across major indices such as the Shanghai and Shenzhen composite indicesIndications from the financial analysis firm Wind reveal a cumulative rise exceeding 1% for the Shanghai index in the early days of trading, with the Shenzhen and ChiNext indices witnessing increases of more than 4% and 5%, respectively.

Looking ahead, there is a palpable sense of optimism among institutional investors, particularly public mutual funds and brokerage firms, concerning the stability and potential growth of the A-share marketAnalysts postulate that favorable policies and favorable valuation conditions could further rekindle market enthusiasm, allowing for continued bullish momentumMiddle-term projections hinge upon whether current policies can effectively stimulate economic growth and elevate investor sentiment.

CITIC Securities observes that recent governmental financial policies aimed at stabilizing growth while encouraging confidence among investors are likely to further invigorate the market environmentIn contrast, market participants should anticipate fluctuations in short-term trading dynamics, which may reflect an ongoing focus on domestic policy changesParticularly, the technology sector, alongside consumer-driven cyclical industries, are expected to witness positive movements.

As expressed by Sun Di, a fund manager at GF Fund Management, looking toward 2025, expectations are optimistic

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