Eliza Wong
Key Takeaways: Surging Conviction in Chinese Equities
– Domestic stock私募 average仓位 hits yearly high at 78.04%, with 60.02% of funds holding >80% positions
– Top 100 subjective strategy funds outperform quant peers by 10.74% YTD through August 2025
–淡水泉 (Springs Capital) flagship product delivers >50% returns, highlighting stock-picking renaissance
– Structural opportunities dominate as macro recovery requires time, favoring selective growth sectors
– Technology autonomy and domestic computing power emerge as undervalued themes with catalyst potential
Pessimism Fades as Fund Managers Deploy Record Capital
Chinese equity markets are witnessing a remarkable resurgence of confidence among professional investors, with subjective strategy funds leading the charge. Contrary to the quantitative dominance of recent years, fundamentally-driven investment approaches are delivering exceptional alpha generation across multiple sectors. This shift reflects deeper market maturation as participants move beyond defensive posturing toward growth-oriented positioning.
私募排排网 (Simuwang) data reveals the breadth of this optimism: aggregate stock私募仓位 reached 78.04% as of September 12th – the highest level in 2025. More significantly, funds holding heavy or full positions (仓位大于八成) surged to 60.02%, while those completely退出市场 declined to merely 5.08%. This collective positioning demonstrates conviction that structural opportunities outweigh macro uncertainties.
Institutional Participation Across Size Spectrum
The仓位 surge isn’t isolated to specific fund categories. Billion-RMB私募 averaged 78.22% positions with remarkable 11.11 percentage point weekly increases, indicating large players are rapidly deploying capital. Mid-sized funds (5-10 billion RMB) reached even higher allocation levels at 86.49%, while smaller funds maintained 78.85% average exposure. This broad-based participation suggests consensus around abundant opportunities despite economic transition challenges.
Subjective Strategy Outperformance Reaches Double Digits
The quantitative versus fundamental performance gap has flipped dramatically in 2025. Through August, top 100 subjective strategy私募 achieved 37.43% average returns compared to 26.69% for leading quant funds – a 10.74 percentage point differential that validates stock-picking approaches. This reversal follows several years of quantitative dominance during market uncertainty periods.
淡水泉投资 (Springs Capital), among China’s most respected institutional investors, exemplifies this trend. Their flagship “淡水泉成长一期” (Springs Capital Growth Phase I) product has exceeded 50% returns year-to-date, driven by concentrated positions in technology, new consumption and新能源 sectors. The fund’s top five contributing industries –电力设备 (electrical equipment),传媒 (media),电子 (electronics),轻工制造 (light manufacturing) and有色金属 (non-ferrous metals) – demonstrate precise thematic targeting.
Market Environment Shifts Favor Fundamental Analysis
According to淡水泉 analysis, the 2022-2023 defensive market paradigm has given way to renewed focus on fundamental pricing and情绪修复 (sentiment recovery). This creates ideal conditions for stock-pickers who identify companies with sustainable growth profiles rather than chasing momentum factors. The current market exhibits characteristics of a “慢牛” (slow bull) trend with elevated risk appetite supported by liquidity, improving fundamentals and stabilizing external conditions.
Crucially, market leadership shows significant sector rotation without broad泡沫化 (bubbling) concerns. The style pendulum has swung from “确定性优先” (certainty first) toward “成长性优先” (growth first), diminishing appeal of dividend assets while elevating emerging growth sectors. This includes new consumption patterns, innovative pharmaceuticals, robotics and AI hardware – all benefiting from renewed focus on fundamental growth potential rather than defensive characteristics.
Structural Opportunities Dominate Investment Landscape
Despite improving sentiment,淡水泉 emphasizes that comprehensive macro improvement requires additional time. Consequently, market opportunities will likely remain predominantly structural rather than broad-based. As certain growth sectors become crowded, capital will increasingly prioritize safety margins, creating potential in undervalued growth segments with expectation gaps and lower trading density.
Technology autonomy represents particularly compelling structural opportunities. Compared to soaring overseas computing power sectors, domestic算力 (computing power) plays remain underappreciated with significant valuation repair potential. Recent major internet companies’ new orders provide positive industry catalysts that could drive further sector advancement.
Navigating Layered Market Performance
相聚资本 (Xiangju Capital), another prominent subjective strategy firm, notes increasingly stratified market performance as the rally extends. August data reveals dramatic divergence:通信 (communications) and电子 (electronics) sectors exceeded 30% gains while煤炭 (coal) and钢铁 (steel) showed minimal advancement and银行 (banking) declined. This dispersion challenges investors to capture alpha without broad market participation.
Xiangju’s approach combines deep expertise within specific capability circles with macro judgment and asset allocation skills. This enables position adjustment across market phases using sector ETFs or other tools when macro conditions change, avoiding overreliance on bottom-up stock selection during transitional periods.
Implementation Framework for Structural Opportunity Capture
Successful navigation of China’s equity markets requires disciplined approach to structural opportunity identification. Institutional investors emphasize three critical dimensions:
– Sector rotation timing: Monitor policy catalysts and valuation gaps between domestic and international peers
– Crowding metrics: Avoid overconcentrated themes while maintaining exposure to valid long-term trends
– Liquidity conditions: Balance participation in momentum-driven moves with fundamental valuation anchors
Technology Autonomy: Case Study in Structural Opportunity
Domestic computing power development illustrates effective structural opportunity analysis. While global semiconductor and AI stocks surged, Chinese counterparts lagged due to technology access concerns and macroeconomic headwinds. However, several factors now support catch-up potential:
– Policy support through中国制造2025 (Made in China 2025) initiatives
– Supply chain redundancy demands from multinational corporations
– Valuation discounts exceeding 40% compared to international peers
– Recent contract awards to domestic suppliers from major cloud providers
Strategic Positioning for Evolving Market Conditions
The current environment favors investors who balance conviction with flexibility. High仓位 levels indicate strong institutional belief in opportunity availability, but selective exposure remains critical. Successful funds emphasize several positioning principles:
– Barbell approach: Combine established leaders with emerging innovators across growth sectors
– Thematic diversification: Spread exposure across multiple structural trends rather than concentration
– Active risk management: Maintain discipline around position sizing and valuation parameters
Performance Sustainability Considerations
Forward Outlook: Selective Growth Amid Economic TransitionChina’s equity markets present compelling opportunities despite economic transition challenges. The resurgence of subjective strategy outperformance reflects market maturation and renewed focus on fundamental analysis. Structural opportunities abound in technology autonomy, new consumption patterns and advanced manufacturing sectors.
Institutional仓位 levels demonstrate strong conviction, but selectivity remains essential. Investors should focus on companies with sustainable competitive advantages, reasonable valuations and exposure to long-term growth themes. The market’s continued stratification suggests stock-picking effectiveness should persist as correlations decrease between sectors and individual names.
Monitor upcoming policy developments, particularly around technology support measures and consumption stimulation programs. These catalysts could drive further outperformance of fundamentally-selected positions. Maintain flexibility to adjust exposures as macro conditions evolve, using sector ETFs or other tools to efficiently express views.
The current environment rewards deep research and disciplined execution. While challenges remain, China’s equity markets offer exceptional opportunities for investors who identify structural growth companies trading at reasonable valuations. Focus on quality management teams, sustainable business models and alignment with long-term economic development priorities.
