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 investors. As 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 market. Notably, 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 unnoticed. A key takeaway from the fourth-quarter performance is the observed fluctuation in market valuations. By the end of September 2024, the market experienced a rapid recovery in valuations, but the upward momentum seemed to stall shortly thereafter. As 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 quarter. When 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%, respectively. This 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. 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 rate. By the close of the fourth quarter, public ETF assets reached 4.7 trillion yuan, up from 4.5 trillion yuan in the third quarter. Enhancements 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 sectors. Influenced by various factors—including industry growth rates and the burgeoning artificial intelligence sector—fund managers have recalibrated their strategies. The 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 banking. Conversely, 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 space. An 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. The rise in the artificial intelligence industry led to increased allocations to computer and media sectors, while renewable energy and banking also played a role. Conversely, commodities, pharmaceuticals, and food & beverage sectors experienced marked declines in investment allocations. Estimates 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 corrections. As 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 indices. Indications 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 market. Analysts postulate that favorable policies and favorable valuation conditions could further rekindle market enthusiasm, allowing for continued bullish momentum. Middle-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 environment. In contrast, market participants should anticipate fluctuations in short-term trading dynamics, which may reflect an ongoing focus on domestic policy changes. Particularly, 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. It is believed that as economic conditions improve and market tolerance for risk amplifies, opportunities associated with technology, particularly in the artificial intelligence sector, may provide promising avenues for investment. This assessment affirms a robust belief in the potential of AI technologies as they gain traction in various business contexts.

Similarly, finance professionals like Jin Zicai from Caitong Fund Management emphasized their focus during the fourth quarter on both the computational power sector and consumer segments. Targets in domestic computational capabilities are believed to be primed for enhancement in parallel with surging investments, potentially emulating noteworthy trajectories witnessed abroad in the sector. Concurrently, there is a clear push toward companies manifesting new business models and products within the consumer space, linking their strategies to current consumer trends focused on value and affordability.