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Since the beginning of the second quarter, numerous A-share companies have disclosed their latest top ten shareholder lists due to share buybacks or major asset reorganizations, revealing the portfolio adjustments of Qualified Foreign Institutional Investors (QFIIs). Overall, foreign capital's long-term allocation intention towards China's capital market remains positive, with distinct structural accumulation characteristics and sustained optimism towards the technology sector.
Based on incomplete statistics up to June 29th, QFIIs have newly entered or increased their stakes in 14 A-share companies since Q2, with their investment focus centered on core technology and smart manufacturing. Two companies each are from the electronics, power equipment, and basic chemicals industries.
In terms of capital nature, foreign investors in A-shares can be categorized into two types: long-term allocation funds like sovereign wealth funds and overseas pension funds, which maintain stable holdings and adjust portfolios infrequently; and trading-oriented funds such as hedge funds and overseas quantitative funds, which have flexible holdings and engage in frequent tactical trading.
Since Q2, mainstream market-oriented foreign institutions like Goldman Sachs (including Goldman Sachs Group and Goldman Sachs International) and Morgan Stanley International have been relatively active in portfolio adjustments. Goldman Sachs has newly entered the top ten shareholder lists of 8 companies, while Morgan Stanley has newly entered the lists of 5 companies.
Additionally, UBS Group has newly entered the top ten shareholder lists of 3 companies, Barclays Bank PLC has newly entered the list of 1 company, and Schroder International Selection Fund China A (Exchange) has slightly increased its stake in 1 company.
In summary, foreign capital has newly entered or increased stakes in 14 individual stocks since Q2. These companies are distributed across sectors such as electronics, semiconductors, AI, smart hardware, healthcare, and electrical equipment.
Bi Mengmin, a researcher at Geshang Fund, stated that, firstly, foreign capital's sector additions are highly concentrated in technology and advanced manufacturing, with many companies being specialized leaders in controllable industrial chains. Secondly, there is a preference for small to mid-cap targets, with a large number of additions concentrated in small and mid-cap stocks with market capitalizations between 2 billion and 20 billion yuan. Some foreign investors are contrarian in deploying capital into leading companies in specific segments where valuations are at historical lows and previous declines were significant. Finally, stock selection emphasizes earnings delivery capability, with foreign additions often targeting core tech companies with actual orders and trackable profit expectations. While differences exist among different QFIIs, sectors like the upstream AI industry chain and smart grids have seen synchronized additions by multiple foreign institutions.
Furthermore, foreign capital shows divergent views on adjustments for some companies. For instance, Changgao Electric gained an increased stake from Goldman Sachs but saw a reduction from the Abu Dhabi Investment Authority. Hengyu Xintong received an increased stake from Morgan Stanley but was reduced by Goldman Sachs.
Bi Mengmin noted significant differences in internal strategies among different QFIIs. Market-oriented investment bank-type QFIIs trade more flexibly and may tactically reduce holdings or cut losses on stocks that have seen large gains, have stretched valuations, or have short-term fundamentals falling short of expectations. Sovereign wealth fund-type QFIIs have longer holding periods and typically make only minimal rebalancing adjustments to core holdings like panel makers. The scenario where one institution reduces while another increases its stake in the same stock reflects differing risk-return assessments among different capital sources.
Looking ahead to the second half of the year, Xing Shi Investment believes that from a medium-term perspective, earnings delivery in the technology sector is expected to digest current valuations, providing support for medium-term performance. Meanwhile, within non-technology sectors, there are cases where profit expectations are improving but stock prices remain relatively stagnant. As corporate earnings increasingly drive the stock market in the latter half, these sectors may see some performance.
Bi Mengmin believes A-shares are likely to continue exhibiting structural market trends. Driving factors include expectations for a recovery in listed companies' profit growth rates, overall market valuations remaining in a reasonably low to moderate range, and the potential for phased foreign capital inflows amid global capital reallocation. Structurally, market style may tend towards balance. The technology theme is still favored for the second half, but high-dividend yield sectors like banking and energy, along with some pro-cyclical varieties, may also see recovery. However, it is important to note that internal and external risks persist.
Furthermore, foreign capital maintains a long-term positive outlook on the technology sector. Wang Ying, Morgan Stanley's Chief China Equity Strategist, believes that against the backdrop of a global focus on energy self-sufficiency and efficiency improvement, China is in a favorable position due to its competitive supply chain. Simultaneously, China is expected to continue increasing policy support in areas like AI and biotechnology. These themes possess medium- to long-term sustainability and are anticipated to gradually foster more globally leading enterprises.
Fidelity International believes the investment value of Chinese hardware companies is rising, as they are increasingly becoming an important force in the global physical AI industry chain. Continuous release of innovation vitality, increasing R&D investment, coupled with a vast talent pool, are jointly propelling industry development.