On July 18th, Yinhua Fund released the second quarter report for its fund in 2024. The report for Yinhua Xinyi, managed by the renowned fund manager Li Xiaoxing, showed that as of the end of the second quarter of 2024, the fund's equity position was 92.39%, a decrease of 1.41 percentage points from the end of the first quarter. According to the disclosed top ten holdings at the end of the second quarter, compared to the end of the first quarter, six new stocks including BOE A (000725.SZ), Hikvision (688041.SH), Aerospace Electrical Appliances (002025.SZ), Three Gorges Energy (600905.SH), Longyuan Power (00916), and AVIC Aircraft (600893.SH) entered the top ten holdings, while Inovance Technology (300124.SZ), Guizhou Maotai (600519.SH), ZTO Express-W (02057), Wuliangye (000858.SZ), Eastern Fortune (300059.SZ), and China Minmetals Resources (002738.SZ) exited the top ten holdings. As of the end of the reporting period, the net asset value per share of Yinhua Xinyi Flexible Allocation Hybrid A Fund was 2.0898 yuan, with a growth rate of -2.74%; as of the end of the reporting period, the net asset value per share of Yinhua Xinyi Flexible Allocation Hybrid C Fund was 2.059 yuan, with a growth rate of -2.81%; the benchmark performance rate was -0.13%. Li Xiaoxing mentioned in the report that investors continue to concentrate on stable targets with large market values. With the changing macroeconomic environment, market preferences have shifted from high growth to high quality. The fund's investment direction focuses on growth-related sectors, moderately reducing the pursuit of high growth and increasing the demand for quality. Currently, the fund's holdings are concentrated in sectors such as military industry, electronics, green energy, pharmaceuticals, non-ferrous metals, media, and chemicals, choosing targets at the bottom of the cycle with reasonable stock prices and valuations. In addition, with the approaching U.S. election, there is a certain level of uncertainty in the trade policies of Europe and the United States. Therefore, some industries with excessive exposure to European and American demand, especially in the fields of power equipment, new energy, automobiles, and some electronics, have been temporarily avoided. The focus is on self-reliance and core technology equipment localization in the tech sector, as well as domestic demand-related opportunities. Although some investment opportunities related to foreign demand have been missed, it is believed that domestic demand and related targets will gradually catch up in the second half of the year. In the semiconductor sector, developing new high-quality production capacity and high-level technological self-reliance are important directions supported by national policies, with a focus on semiconductor domestic substitution and defense technology. Global semiconductor demand recovery brings main incremental growth, while other downstream sectors show signs of moderate recovery. With the new round of expansion from domestic leading wafer factories, opportunities in domestic equipment, materials, and components driven by breakthroughs in advanced processes are promising, focusing on domestically-produced computing power chips. In the new energy sector, the period of significant expansion of new energy production capacity is nearing its end, and the gradual improvement of oversupply on the supply side and stable domestic demand, combined with policy uncertainties in Europe and America, present certain challenges for the investment logic on the manufacturing side. The report is optimistic about green energy operators with fundamentals at the left of the trough and stock prices at the right of the trough. With the improvement in future consumption capacity, continuous decline in generation costs, stable growth in electricity consumption, and promotion of green energy and carbon tariffs, the asset quality of green energy operators is expected to improve, and performance is expected to enter a rapid growth phase. However, due to the rapid decline in the consumer sector in May and June, valuations are at the lowest percentile in the past five years. In the short term, under internal and external risks, the dividend factor remains effective, with high-quality companies in the consumer sector showing some decline in growth potential as they expand in size, but with increasing dividend rates, value is becoming more prominent. In the pharmaceutical sector, due to significant short-term performance pressures, stock prices have continued the downward trend of the previous quarter. However, opportunities are gradually emerging in some undervalued stable growth state-owned enterprises in the pharmaceutical sector, leading to an increase in positions in these pharmaceuticals in the second quarter. Additionally, the short-term income and performance of banks continue to be under pressure, but the potential decline in deposit interest rates in the future may alleviate the pressure on bank interest spreads. The peak of non-performing loans in the real estate sector has passed, and banks are increasing reserves, exerting stronger control over performance. Most banks have raised or maintained high dividend payout ratios, and dividend yields have also increased to a certain extent, meeting the preference for long-term funds with low volatility and high dividends.