Preface:

Every shift in public funds' holdings closely mirrors China's economic structural transformation, reflecting market judgments and expectations for various industries' development prospects.

From a macro perspective, capital's inclination towards the technology sector will propel the upgrading and transformation of China's technology industry.

As a strategic emerging industry, the technology sector holds immense significance for bolstering the country's overall strength and international competitiveness.

Guided by capital, more resources will pour into the technology sector, fostering the optimization and upgrading of the industrial structure and steering China's economy towards an innovation-driven paradigm.

Author | Fang Wensan

Image Source | Network

Surpassing Moutai and Ningde, Tencent Tops Public Funds' Heavy Holdings

According to the public fund holdings report for the first quarter of this year, Tencent Holdings, with an active equity fund holdings market value of 69.8 billion yuan, surpassed Ningde Times and Kweichow Moutai for the first time to become the top holding of funds. This marks the first instance where a Hong Kong-listed company has topped the list.

Wind data indicates that during the first quarter, over 1,000 public funds heavily held a total of 152 million shares of Tencent, representing a quarter-on-quarter increase of 24.27%.

Amidst significant institutional holdings, the company's share price surged by 19.18% in the first quarter. By the end of the quarter, the total market value of public funds' holdings had risen by 47.60% compared to the end of the fourth quarter of last year.

Ultimately, Tencent Holdings, with a market value of 69.8 billion yuan, emerged as the stock with the highest market value held by public funds (stock funds + hybrid funds), significantly outpacing Ningde Times (55.5 billion yuan) and Kweichow Moutai (38.1 billion yuan) over the same period.

Notably, the substantial increase in Tencent's institutional holdings is not an isolated case. Companies like Alibaba (ranked fifth), SMIC H-shares (ninth), Xiaomi Group (eleventh), and China Mobile (nineteenth) also witnessed significant growth in their shareholdings.

All these companies were included in the Stock Connect program just two quarters ago and have since soared into the top 20 heavy holdings of public funds, experiencing substantial increases in their shareholdings.

The third to tenth largest holdings of public funds include Kweichow Moutai, Alibaba-W, Midea Group, Luxshare Precision, BYD, Zijin Mining, SMIC, and Wuliangye Yibin. As of the end of the first quarter, each of these stocks' market value exceeded 20 billion yuan.

In terms of increases, Alibaba-W and Tencent Holdings saw the largest hikes in market value held by public funds in the first quarter of this year, with increments of 22.651 billion yuan and 22.305 billion yuan, respectively.

On the other hand, Ningde Times experienced the largest decrease in market value held by public funds in the first quarter of this year, with a reduction of 15.753 billion yuan.

Additionally, the market value of holdings in Shanghai Electric, Zhongji Xuchuang, Cambrian Genomics, Xinyisheng, Meituan-W, and ZTE declined between 5 billion yuan and 10 billion yuan.

Notably, all Hong Kong-listed companies that made it into the top 20 heavy holdings of public funds this time possess a [technological attribute], and another shared trait is their presence in the AI technology field, which investors hold high hopes for.

Goldman Sachs has clearly stated that in China's AI industry, [Alibaba leads in AI infrastructure, while Tencent leads in AI applications].

To further elaborate, Xiaomi excels in AI end-side devices, SMIC in chip manufacturing, and China Mobile in communication computing services. The quarterly top holdings list of public funds indeed mirrors the concentration of giants within the AI industry's core main chain, rather than mere sector rotation.

Changes in Public Funds' Holdings Reflect Economic Transformation

Looking back over the past two decades, the evolution of fund heavyweights has mirrored the cyclical dominance of the banking and real estate industries, the rise of baijiu and manufacturing, and now the leading position of the technology sector.

If the stock market is regarded as an economic barometer, then fund heavyweights undoubtedly serve as a wind vane guiding the direction of industrial development.

From the current perspective, with the exception of Suning Appliance and Kweichow Moutai, almost all former public fund heavyweights were cyclical stocks.

However, as a representative of high-end baijiu, Kweichow Moutai's development is also closely tied to the ups and downs of cyclical industries such as real estate and infrastructure.

Industry experts opine that past cyclical stock market performance was closely tied to economic development.

Since 2003, with the accelerated advancement of industrialization and urbanization, as well as China's rapid integration into the global economic system following its accession to the World Trade Organization, China's economy embarked on a new wave of high-speed growth, witnessing significant improvements in the quality of economic growth and maintaining GDP growth rates above 10% for several consecutive years.

In terms of industry performance, corporate profits were primarily concentrated in the five major industries of petrochemicals, steel, automobiles, power, and banking, which investors hailed as the [Five Golden Flowers].

Looking back over the past decade, the changes in public funds' heavyweights resemble a vivid history of economic development, clearly illustrating the trajectory of China's economic transformation.

In recent years, with the rise of the new energy industry, leading companies in the sector such as Longi Green Energy and Ningde Times have swiftly become heavy holdings of public funds.

These companies have demonstrated robust competitiveness in the global market, signifying the rise of China's advanced manufacturing.

Now, the ascent of technology stocks like Tencent signifies an acceleration in China's economic transformation towards innovation-driven development.

China's Hard Technology Enters a Critical Harvest Stage

The low valuation characteristics of Hong Kong-listed stocks also make their technology stocks a significant consideration for public funds' heavy holdings.

In the first quarter, the Hong Kong-listed internet sector exhibited a trend of rising first and then falling.

On the policy front, the top-level design of [AI Enabling the Entire Chain] was implemented, and the expansion of computing infrastructure and the broadening of application scenarios accelerated the reshaping of industry valuation.

However, due to the impact of external risk events and fluctuations in market liquidity, the sector underwent a phased adjustment.

Looking ahead to the second quarter, we will closely monitor the commercialization process of AI technology and the recovery pace of the consumer market.

Tencent Holdings ranks first among active equity funds' heavy holdings, and during this quarter, the holdings of multiple Hong Kong-listed technology stocks have increased.

Analyzing the rationale behind this, under the theme of new productive forces, Hong Kong-listed technology stocks have garnered significant attention.

Furthermore, as China's hard technology breakthroughs enter a harvest and critical period, especially amidst the impact of the external environment, China has accelerated the pace of domestic substitution, particularly evident in the technology sector.

The above backdrop, coupled with the low valuation characteristics of Hong Kong-listed stocks, makes Hong Kong-listed technology stocks a significant consideration for public funds' heavy holdings.

Maintaining a relatively high proportion of Hong Kong-listed internet holdings is predicated on observations of the internet industry following several years of business adjustments.

The industry has not only achieved notable results in business optimization, quality and efficiency improvements, and shareholder returns but has also made breakthroughs in technological iteration, business innovation, and strategic expansion.

These developments hold positive implications for the industry's return to growth and the realization of value reassessment.

Conclusion:

Investment opportunities in domestic internet giants, cloud computing, computing power supply chains, AI applications, and other fields will eventually surface.

Strengthening the allocation of AI inference and applications is grounded in the consideration of the stage of industrial development.

As model capabilities gradually mature and engineering drives cost reduction and efficiency enhancement, the demand for the inference side, encompassing computing power, storage, cloud, and end-side, is anticipated to surge significantly, which will also propel the growth of the application market.

Adding low-valuation technology consumer products is partly attributed to the expectation of economic recovery, which will also revive the consumer market;

On the other hand, technological advancements will have a profound impact on products across certain categories.

Partial reference materials: Hong Kong Stock Research Institute: "From the 'Moutai-Ningde Era' to the 'Tencent Era', a Major Shift in China's Capital Market's 'C-Position'", Capital Deep Dive: "Times Have Changed, New Records Have Come", Gongbaojiding: "First Quarter's Active Equity Fund Heavy Holdings Are Out, This Stock Surpasses 'Ningde' to Top the List!", Finance and Economics: "Tencent and Alibaba Among Fund Popular Stocks in the First Quarter, Who Is Embracing Hong Kong-Listed Technology Stocks?", ChiNext Observation: "First Quarterly Reports of the First Batch of Hong Kong Stock Funds Released, Tencent, Xiaomi, Alibaba, etc., Are Heavily Held, What Is the Future Prospect?"