In many reports, we have proposed that white horse stocks may become the main trend in the market in the medium term, so what is the current situation of white horse stocks in terms of holdings? What insights do public funds' first-quarter reports offer for the future trend of white horse stocks? The following text will analyze this. The equity positions of funds in the first quarter of 2014 saw a slight decrease, but still remained at historical highs. The latest fund quarterly report for the first quarter of 2014 shows that the stock positions of actively managed equity funds decreased slightly compared to the fourth quarter of 2013, but are still at historically high levels. Specifically, the stock position of general stock funds in the first quarter of 2014 was 89.1%, a decrease of 0.4 percentage points compared to the fourth quarter of 2013, and the current stock position is at the 96th percentile of historical levels since 2013; the stock position of equity-oriented mixed funds was 87.4%, a decrease of 0.5 percentage points compared to the previous quarter, and is at the 95th percentile of historical levels; the stock position of flexible allocation funds was 75.5%, a decrease of 0.5 percentage points compared to the previous quarter, and is at the 86th percentile of historical levels. Looking back at the historical trends of the A-share market and fund positions, it can be observed that the two have been highly correlated in the past, but this correlation has significantly decreased in recent years. Funds have maintained high positions in different market environments, indicating that most fund managers may prefer to adjust their portfolio structures to respond to market changes. Overall, there has been very little change in the holdings of white horse stocks in the first quarter. As mentioned earlier, in recent years fund managers have been more inclined to adjust their portfolio structures. So against the backdrop of a V-shaped trend in the market in the first quarter, did the holdings of white horse stocks change? Since the CSI A50 Index includes the most representative leading listed companies in various industries, we use the CSI A50 Index as a representative of the white horse sector. The fund quarterly report for the first quarter of 2014 shows that the proportion of fund holdings in the white horse sector slightly increased by 0.4 percentage points to 24.1% compared to the fourth quarter of 2013, placing it in the 40th percentile from low to high since 2013. In terms of over-allocation ratio, the over-allocation ratio of the white horse sector relative to the free float market value of the entire A-share market decreased by 0.7 percentage points to 5.1 percentage points in the first quarter of 2014, reaching a relatively low level of 34% since 2013. In addition, the Maotai Index includes industry leaders in the A-share market with strong growth potentials and market influence. If we use the Maotai Index as a representative of the white horse sector, we can also observe a decrease in the proportion of fund holdings in the Maotai Index. In general, the fund holdings of the white horse sector remained relatively stable in the first quarter of 2014. The lack of increase in white horse stock holdings in the first quarter is due to the continued recovery of both the basic fundamentals and the capital environment. As we have mentioned in many previous reports, based on historical experience, white horse stocks achieve excess returns when the domestic economy is improving, corporate profits are improving, and incremental funds are flowing in. However, in the first quarter of 2014, given the unverified recovery of the domestic economy and delayed overseas interest rate cuts, institutional investors remain cautious about white horse stocks. Specifically, in terms of the basic fundamentals, there are still some challenges that need to be overcome in the short term. For example, since the beginning of the year, price data has continued to hover at low levels, with the March year-on-year PPI for all industrial products at -2.8%, maintaining a low negative trend. Real estate transactions have fallen compared to historical levels for the same period, with a year-on-year decrease of 19% in sales area for commodity houses in the first quarter. These factors make it difficult for institutional investors to quickly reverse their expectations for the fundamentals, and confirming a further recovery trend will require more time. In addition to the basic fundamentals, on the capital side, there is significant pressure from the delay in interest rate cuts in the market. At the end of last year, investors widely expected the Federal Reserve to cut interest rates for the first time in March 2014, but since the beginning of the year, the US has faced difficulties in combating inflation. The March US CPI continued to rebound to 3.5% year-on-year, and the core inflation remained stagnant. Recently, Federal Reserve officials have frequently made hawkish remarks. In this context, the market's expectations for interest rate cuts have been continuously cooling down, and investors still have concerns about the movements of foreign funds. Looking at the industry structure, there were increased holdings in utility/overseas-related industries and decreased holdings in healthcare/electronics in the first quarter. Although public funds' overall holdings in the white horse sector did not change much in the first quarter, there was a noticeable differentiation in the internal holdings structure of white horse stocks: holdings in utility and related industries saw a significant increase, with the holdings of utility companies (in the first quarter of 2014, the proportion of holdings in utility companies among the top holdings of funds increased by 0.8 percentage points compared to the fourth quarter of 2013, with an over-allocation ratio increase of 0.3 percentage points, the same below), and industries such as home appliances (increase of 1.0 percentage points, 0.6 percentage points), power equipment (increase of 0.7 percentage points, 0.9 percentage points), and automobiles (increase of 0.3 percentage points, 0.2 percentage points) all saw noticeable increases. Conversely, holdings in healthcare (decreased by 2.9 percentage points, 1.8 percentage points), electronics (decreased by 1.3 percentage points, 0.7 percentage points), and machinery equipment (decreased by 0.3 percentage points, 0.2 percentage points) all saw relatively significant decreases. So why did internal holdings of white horse stocks show differentiation? We believe that the adjustment of the internal holdings structure of the white horse sector may be influenced by industry fundamentals and policies. For example, the increase in holdings of overseas-related industries may be due to strong export data in the first quarter. China's export amount (in RMB terms) in the first quarter of 2014 increased by 4.9% year-on-year, higher than most consensus estimates, and a significant rebound from the 0.8% growth in the fourth quarter of 2013. The export amounts of home appliances and electric passenger vehicles increased by 12.2% and 18.5% year-on-year respectively in the first quarter, leading to an improved investor outlook on the basic fundamentals of these industries. In addition, the holdings of utility companies and other sectors have increased significantly, possibly due to frequent capital market reform policies introduced since the beginning of the year, which have encouraged listed companies to increase dividends and enhance investor returns, thereby increasing investor interest in these sectors. The decrease in fund holdings of healthcare and electronics in the first quarter may be due to weaker fundamental data and expectations in these industries: in the healthcare sector, it will still take some time for the industry's fundamentals to recover from the bottom. Government health expenditure growth rate for the first quarter of 2014 was -10.7%, showing weaker healthcare fundamentals, which may have led to a decrease in fund holdings. In the electronics sector, although the global semiconductor cycle has clearly rebounded from the bottom since last year, short-term inventory pressures in the industry remain relatively high. Additionally, demand has been affected by the slowing global economic growth, with a weak recovery in end-demand elasticity. According to IDC's forecasts, the global PC market is expected to grow at around 2% by 2024.Current weak recovery trend.Currently, the white horse has been underestimated and under-allocated, and may become the main trend in the medium term. The white horse sector as a whole is currently undervalued and under-allocated: from a valuation perspective, as of 24/4/25, the PE ratio of the CSI A50 Index (TTM, overall method) representing white horse stocks has been in the 17.8th percentile over the past 3 years. In terms of holdings, in 24Q1, funds were 34% overweight in the CSI 50 Index relative to free float market cap, the highest in 13 years. In our previous analysis, we pointed out that the lack of significant allocation to the white horse sector in 24Q1 funds was due to short-term concerns about fundamentals and funding. However, looking at the medium term, both market fundamentals and funding are expected to improve: from a fundamental perspective, with the intensification and effectiveness of stabilizing growth policies, the macro and micro fundamental aspects are expected to gradually improve. We expect A-share earnings to continue to recover, with the year-on-year growth rate of net profits attributable to parent companies in 24 reaching 5-10%; from a funding perspective, if the Fed cuts interest rates in the second half of the year, foreign investors may prefer high-quality white horse stocks that are currently undervalued and under-allocated, with greater earnings resilience, gradually presenting a buying opportunity. The current focus should still be on fundamental verification, and the market may be in a period of consolidation in the second quarter. The nature of the market trend on 2/5 is the first rebound from the bottom, and for the duration and extent of the current upward trend, we believe that historical first rebound from bottom can be a reference. Looking back at the first rebound trends from the bottom of the market in the past four downturns, these trends often lasted around 2-3 months, with index gains of around 25%-30%. The current trend has lasted for about 2 months, with the Shanghai Composite Index up by 17% from its low, the CSI 300 up by 16%, and the Wind A-Share up by 25%. As the current trend continues to rise, the market has gradually accumulated some profit-taking pressure. In fact, since late March, the momentum of the market's rise has weakened, and the pace of further short-term market gains may slow down. Looking ahead, after the completion of the first upward trend following the bottom of the bear market in the past, the market often experienced profit-taking, mainly because the fundamentals were not yet strong enough. During previous profit-taking processes, the Shanghai Composite Index fell an average of 49 days (excluding 2019), with an average pullback of around 14% for the Shanghai Composite Index, CSI 300, Wind A-Share and ChiNext, retracting 0.5-0.7 times the previous uptrend. Currently, the overall policy environment is favorable, but it is important to closely monitor the implementation of policies and whether macroeconomic data can accelerate recovery. In addition, as the earnings reports for the first quarter draw to a close at the end of April, the market may enter a new phase of seeking consensus on annual profits, potentially intensifying short-term market game. Within the white horse sector, short-term stability is more secure for white horses, while the medium-term trend may be towards Chinese advantage manufacturing. The white horse sector can be further divided into two asset categories: white horse stability and white horse growth. The relative performance of white horse stability and white horse growth is related to factors such as relative profit, US bond rates, and risk appetite. In the short term, with the need to consolidate economic recovery, overseas rate cuts further postponed, and market risk appetite awaiting repair, investing in stable white horse assets may be more secure. In the medium to long term, white horse stocks have both growth potential and stability, and Chinese advantage manufacturing may be the most suitable direction within white horse stocks: in terms of stability, China's high-end manufacturing has industrial chain advantages that other countries cannot match; in terms of growth, as the demand for high-end products in emerging countries increases, China's advantage manufacturing exports have a broader space. Recently, China's high-end manufacturing has shown signs of recovery, with performance growth in the high-end manufacturing sector significantly exceeding the overall average from perspectives of industrial value-added and industrial enterprise profits. In addition, attention can also be given to hard technology manufacturing and pharmaceuticals. The 2024 government work report emphasizes the development of new productive forces, pointing the way for future industrial development. Specifically, two areas can be focused on: first, hard technology manufacturing. With policy support for science and technology innovation and accelerated technological breakthroughs, the technology manufacturing sector in the white horse sector is expected to lead the development of new productive forces. In specific fields, attention can be focused on electronics with cyclic rebounds, digital infrastructure and data elements benefiting from fiscal efforts, and AI applications that are rapidly being implemented. Second, pharmaceuticals. The overall pharmaceutical sector is currently undervalued and under-allocated. Under the trend of an aging population, the medium-term trend for pharmaceutical demand remains positive, and attention can be given to balanced growth and value in the pharmaceutical sector. This article is reprinted from the "Haitong Research Strategy" WeChat official account, Analysts: Wu Xinkun, Liu Ying; GMTEight Editor: Huang Xiaodong.