Point 1: Stock holdings fell for two consecutive quarters The market value of public funds' stock holdings declined, with a slight increase in the percentage of A-share total market value. As of 2024Q2, the market value of A-shares held by all public funds was 5.02 trillion yuan, a decrease of 4.27% from the previous quarter. The percentage of public funds' stock holdings as a proportion of A-share total market value increased slightly by 0.03 percentage points from 6.80% in 2024Q1 to 6.83%, reaching the 87.7 percentile level since 2010. In order to more accurately capture the characteristics of public funds' stock asset allocation, the analysis samples regarding fund positions, stock industries, and major holdings are based on actively managed equity funds (ordinary equity funds, equity-balanced funds, and flexible allocation funds) as of 4 p.m. on July 19, 2024 (disclosure rate of 100%). The market value of actively managed equity funds' stock holdings decreased on a month-on-month basis due to market volatility and declining positions. In 2024Q2, the net asset value of actively managed equity funds was 3.49 trillion yuan, a decrease of 3.90% from the previous quarter, with stock holdings valued at 2.93 trillion yuan, a decrease of 7.29% month-on-month. Market volatility and declining positions were the main factors contributing to the decrease in actively managed equity funds' stock holdings, with the Shanghai Composite Index, the CSI 300 Index, and the ChiNext Index falling by 2.43%, 2.14%, and 7.41% respectively in the second quarter. Redemption pressure on funds showed marginal improvement but remained high. In the second quarter, net redemptions of actively managed equity funds decreased, with total net redemptions of 84.8 billion shares in 2024Q2, equivalent to around 92 billion yuan based on initial and final net asset values, a decrease compared to the previous three quarters. However, considering that new issue size of actively managed equity funds in the second quarter was only around 20 billion yuan, the pressure on the fund's liabilities remained high. Actively managed equity funds saw a rapid decrease in stock holdings, while bond assets, cash, and other assets increased on a month-on-month basis. Following a high position rollback in 2024Q1, the positions of actively managed equity funds continued to drop in 2024Q2 by 1.36 percentage points to 84.07%. This included ordinary equity funds dropping by 1.27 percentage points to 88.70%, equity-balanced funds dropping by 1.25 percentage points to 86.93%, and flexible allocation funds dropping by 1.77 percentage points to 75.40%. Point 2: Increasing positions in high-growth technology, reducing positions in consumer healthcare Sector-wise, mainboard positions rose while Double Innovation positions fell 1) The allocation proportion of the main board was 72.68%, up 0.46 percentage points from 2024Q1, but the underweight proportion further expanded, from -8.82% to -9.39%. 2) The allocation proportion of the ChiNext board was 17.46%, down 0.33 percentage points from 2024Q1, but the overallocation of the ChiNext board increased, from 5.88% to 6.26%. 3) The allocation proportion of the Science and Technology Innovation board was 9.76%, down 0.11 percentage points from 2024Q1, but the overallocation of the Science and Technology Innovation board increased, from 3.20% to 3.39%. 4) The allocation proportion of the Beijing Stock Exchange was 0.10%, down 0.01 percentage points from 2024Q1. In terms of style, increased positions in technology growth and cyclical sectors, reduced positions in consumer and healthcare sectors In 2024Q2, actively managed equity funds increased their positions in technology growth and cyclicals while reducing their positions in consumer and healthcare sectors, with a slight increase in financial and real estate sectors. The allocation proportions of actively managed equity funds in technology growth, consumer, cyclicals, healthcare, and financial and real estate sectors were 37.44%, 23.07%, 23.86%, 11.16%, and 4.38% respectively, with changes from the previous quarter of 3.00%, -3.49%, 0.78%, -0.55%, and 0.28% respectively. Additionally, the overallocation proportions of actively managed equity funds in technology growth, consumer, cyclicals, healthcare, and financial and real estate sectors were 11.93%, 8.05%, -7.98%, 4.62%, and -16.62% respectively, with changes from the previous quarter of 3.52%, -2.54%, 0.08%, -0.13%, and -0.95% respectively. Industry allocation-wise, increasing positions in high-growth technology and reducing positions in consumer healthcare In the second quarter, the clues to fund industry allocations are as follows: 1) Significant differentiation within the TMT sector, with performance being a key factor. In 2024Q2, electronics and communications were the top two industries with increased positions in the TMT sector, while computers and media were the second and fifth industries with reduced positions. Apart from the impact of industry market cap styles, performance remains a key factor in the internal differentiation of the TMT sector. According to recent performance forecasts, the median net profit growth rate of electronics in the first half of the year was 62.44%, second only to petroleum, petrochemicals, and transportation sectors, with consistent performance growth rates of over 60% in 2024Q1 and 2024H1, confirming the sector's continued prosperity. The median performance growth rate for communications in the first half of the year also reached 26%, but there were more listed companies in media and computers facing losses in the first half, further leading to the allocation changes within the TMT sector for actively managed equity funds. 2) Strong industry policies driving the electronics sector to increase positions. High growth performance forecasts for the electronics sector in the first half of the year, combined with continued industrial policy catalysts such as major fund launches and developer conferences in the second quarter, are pointing towards a sustained period of prosperity for the electronics sector. Under this backdrop, consumer electronics, components, and semiconductors in the electronics sector saw positions increase by 1.52%, 1.21%, and 0.89% respectively in 2024Q2. 3) Weakening of the export chain allocations compared to the first quarter. Overall, the export chain showed some differentiation, with positions in light manufacturing and textile industries falling in primary industries, but rising in household appliances. In secondary industries, industries with high export proportions such as white goods, power grid equipment, construction machinery, passenger vehicles, and marine equipment saw increased positions, while industries like solar equipment, batteries, ornaments, and black home appliances saw reduced positions. 4) High dividend stocks as a new bottom asset for the new era continue to see increasing allocations. In 2024Q2, the allocation proportions of utilities, banks, and coal sectors increased by 0.61%, 0.31%, and 0.17% respectively. 5) Industries heavily invested in by institutions such as food and beverages, pharmaceuticals, and new energy saw significant reductions. Due to a relatively weak macroeconomic recovery trend, coupled with high redemptions from public funds in the second quarter, industries heavily invested in by institutions such as food and beverages, pharmaceuticals, and new energy saw significant reductions.The strength of institutions' heavy positions in food and beverage, new energy, and pharmaceuticals has significantly fallen.From the perspective of changes in industry allocation in the first-tier industry positions, actively biased equity funds significantly increased their positions in the electronics, communications, and defense industries in 2024Q2. The industries where actively biased equity funds increased their positions the most in 2024Q2 were electronics, communications, defense industry, household appliances, and utilities, with position increases of 3.77 pct, 1.11 pct, 0.63 pct, 0.62 pct, and 0.60 pct respectively. The industries where actively biased equity funds reduced their positions the most in 2024Q2 were food and beverage, computers, power equipment, pharmaceuticals, and media, with position decreases of -3.64 pct, -1.46 pct, -0.80 pct, -0.55 pct, and -0.26 pct respectively. Excluding thematic/sector funds, public funds continued to significantly increase their positions in electronics, communications, and utilities, with communications and utilities showing more notable increases. After excluding new energy/pharmaceutical/consumer/TMT thematic or sector funds, the industries where actively biased equity funds increased their positions the most in 24Q2 were electronics, communications, utilities, household appliances, and banks, with position increases of 3.76 pct, 1.20 pct, 0.61 pct, 0.58 pct, and 0.47 pct respectively. The industries where actively biased equity funds reduced their positions the most were food and beverage, computers, pharmaceuticals, power equipment, and media, with position decreases of -3.56 pct, -1.64 pct, -0.58 pct, -0.49 pct, and -0.35 pct respectively. In comparison with the overall situation, after excluding industry/theme funds, public funds had a larger increase in positions for banks, communications, and utilities, while significant decreases in positions were observed for computers, media, and pharmaceuticals. Looking at changes in second-tier industry positions, the industries where actively biased equity funds increased their positions the most in 2024Q2 were consumer electronics, communications equipment, components, semiconductors, and white goods, with position increases of 1.52 pct, 1.30 pct, 1.21 pct, 0.89 pct, and 0.78 pct respectively. The industries where actively biased equity funds reduced their positions the most in 2024Q2 were Baijiu II, photovoltaic equipment, software development, computer equipment, and automotive components, with position decreases of -3.16 pct, -0.90 pct, -0.68 pct, -0.56 pct, and -0.45 pct respectively. In terms of absolute industry positions in the first-tier industry, electronics emerged as the top overweight industry for public funds, with its position exceeding the previous high points seen in 2020-2021. The top five industries in terms of positions for actively biased equity funds were electronics, pharmaceuticals, power equipment, food and beverage, and nonferrous metals, with allocation ratios of 15.75%, 11.16%, 10.09%, 9.52%, and 6.04% respectively. The bottom five industries in terms of positions were comprehensive, beauty care, social services, environmental protection, and retail trade, with allocation ratios of 0.09%, 0.28%, 0.37%, 0.38%, and 0.40% respectively. By looking at historical position percentile rankings, it was observed that positions in electronics, communications, utilities, nonferrous metals, and automobiles were at historically high levels, while positions in real estate, retail trade, building materials, non-bank finance, and computers were at historically low levels. Additionally, among the heavily weighted industries, positions in food and beverage and pharmaceuticals were at moderately low levels, while positions in power equipment were at moderately high levels. In terms of overweight ratios in the first-tier industry, actively biased equity funds were overweight in electronics, power equipment, pharmaceuticals, and food and beverage. The top five industries where the heavily weighted stocks of actively biased equity funds were overweight were electronics, power equipment, pharmaceuticals, food and beverage, and household appliances, with overweight ratios of 7.83%, 4.63%, 4.62%, 4.19%, and 2.94% respectively. The bottom five industries in terms of overweight were banks, non-bank finance, petroleum and petrochemicals, building decoration, and utilities, with underweight ratios of -10.86%, -5.50%, -4.59%, -1.44%, and -1.31% respectively. Looking at percentile rankings, the overweight ratios for electronics, nonferrous metals, utilities, and transportation were historically high, while positions for computers, non-bank finance, social services, beauty care, food and beverage, media, and retail were at historically low levels. In terms of absolute positions in the second-tier industry, Baijiu II, semiconductors, and batteries had the highest positions. Specifically, the top 10 second-tier industries in terms of positions for actively biased equity funds were Baijiu II, semiconductors, batteries, consumer electronics, communications equipment, white goods, industrial metals, medical equipment, chemical pharmaceuticals, and power, with allocation ratios of 8.55%, 7.32%, 5.23%, 4.23%, 4.08%, 3.73%, 3.60%, 3.60%, 3.50%, and 2.77% respectively. When looking at overweight ratios in the second-tier industry, actively biased equity funds mainly overweighted specific industries in the consumption and growth sectors. Specifically, the top 10 second-tier industries where actively biased equity funds were overweight in 2024Q2 were Baijiu II, semiconductors, batteries, communications equipment, white goods, consumer electronics, medical equipment, industrial metals, components, and chemical pharmaceuticals, with overweight ratios of 4.68%, 3.81%, 3.21%, 2.85%, 2.54%, 2.16%, 2.09%, 1.97%, 1.88%, and 1.43% respectively. Key Point 3: Dividend holdings slightly increased, but overweight ratios remain low The dividend holdings of actively biased equity funds in 24Q2 slightly increased. Specifically, in the top ten industries with the highest average dividend yield from 2022 to 2024, holdings increased in coal, banks, petroleum and petrochemicals, steel, household appliances, building materials, transportation, and building decoration, with increases of 0.17 pct, 0.31 pct, 0.05 pct, 0.09 pct, 0.62 pct, 0.03 pct, 0.02 pct, and 0.06 pct respectively; while holdings decreased in textiles and clothing, and food and beverage, with decreases of 0.18 pct and 3.64 pct. The second-quarter high dividend industries overall saw a slight increase in holdings, with eight out of the top ten industries with high dividend yields being increased, reflecting the increasing importance of dividend yields for public funds. english:From the perspective of over-allocation ratio, the over-allocation ratios of steel, household appliances, building materials, and building decoration in the top ten dividend yield industries increased by 0.14 pct, 0.58 pct, 0.08 pct, and 0.09 pct, respectively; while the over-allocation ratios of coal, banks, petroleum and petrochemicals, textiles and apparel, transportation, and food and beverage industries decreased by 0.03 pct, 0.98 pct, 0.38 pct, 0.11 pct, 0.19 pct, and 2.97 pct respectively. The proportion of holdings of low volatility dividend index and CSI Dividend Index components in equity-oriented funds increased. The holdings of low volatility dividend index and CSI Dividend Index components in the major equity holdings in equity-oriented funds increased by 0.12 pct and 0.60 pct to 2.76% and 6.17%, respectively, reaching levels in the 25.60% and 33.30% percentile of the past decade. From the perspective of over-allocation ratios, the over-allocation ratios of low volatility dividend index and CSI dividend index components in major equity holdings in equity-oriented funds decreased by 0.63 pct and 0.91 pct to -3.72% and -4.84%, respectively, reaching levels in the 20.50% and 25.60% percentile of the past decade. Highlights four: Xinyisheng, Industrial Wealth, BYD, and Yangtze Electric Power are the new top 20 holdings of public funds. In the second quarter of 2024, the top 5 stocks with increased holdings in actively managed equity funds are Luxshare Precision, Zhijie Xuchuang, BYD, Xinyisheng, and Industrial Wealth, with respective increases in holdings of 0.92 pct, 0.56 pct, 0.55 pct, 0.55 pct, and 0.53 pct compared to the previous quarter; the top 5 stocks with reduced holdings are Guizhou Maotai, Luzhou Laojiao, Wuliangye, Hengrui Medicine, and Shanxi Fenjiu, with decreases in holdings of 1.15 pct, 0.72 pct, 0.57 pct, 0.37 pct, and 0.30 pct respectively. As of 2024Q2, the top ten major holdings of actively managed equity funds are Ningde Times, Guizhou Maotai, Luxshare Precision, Zijin Mining, Midea Group, Zhijie Xuchuang, Wuliangye, Beckman Medical, Luzhou Laojiao, and Hengrui Medicine, with holdings accounting for 3.27 pct, 2.96 pct, 2.26 pct, 2.05 pct, 1.88 pct, 1.66 pct, 1.53 pct, 1.46 pct, 1.40 pct, and 1.11 pct respectively of the total market value of major holdings. Compared with the previous quarter, there were the following changes: Xinyisheng, Industrial Wealth, BYD, and Yangtze Electric Power are newly ranked among the top 20 holdings of actively managed equity funds. China Mobile, China Micro Company, Wanhua Chemical, and China Merchants Bank have dropped out of the top 20 holdings of actively managed equity funds. From the perspective of changes in the number of fund holdings, the top 5 stocks with increased fund numbers of holdings are Luxshare Precision, BYD, Zhijie Xuchuang, Industrial Wealth, and Xinyisheng; the top 5 stocks with decreased fund numbers of holdings are Guizhou Maotai, Luzhou Laojiao, Wuliangye, Transsion Holdings, and Kingsoft Office. Highlights five: the concentration of individual stocks continues to increase, and public funds focus on leading trends. In the second quarter, the concentration of individual stocks in actively managed equity funds continued to increase, further strengthening the trend of focusing on industry leaders. There was a differentiation in the concentration of top 5/10 major holdings, with a slight decline, and a significant reduction in the holdings of leading companies in the food and beverage industry such as Guizhou Maotai, Luzhou Laojiao, and Wuliangye contributing to the decline in the concentration of the top 5/10 major holdings. However, the concentration of the top 30/50/100 major holdings continued to increase, further strengthening the trend of public funds focusing on industry leaders. Specifically, from the perspective of individual stocks, the proportion of holdings of the top 5/10/30/50/100 major holdings in actively managed equity funds compared to the total holdings market value of major holdings decreased by 1.34 pct, decreased by 1.24 pct, increased by 1.12 pct, increased by 2.10 pct, and increased by 2.40 pct. From an industry perspective, the proportion of the top 3/5/10 major holdings in actively managed equity funds compared to the total holdings market value increased by 0.16 pct, decreased by 1.22 pct, and increased by 0.06 pct. In terms of the proportion of holdings of leading companies in primary industries, there is also a clear trend towards concentration on industry leaders. By calculating the proportion of market value held by actively managed equity funds in each of the first, second, and third leading industry positions, it can be seen that the trend of funds focusing on industry leaders has continued since the first quarter of 2024 and has spread to the industry level. Among the 31 primary industries classified by Senwam in the second quarter of 2024, the proportions of holdings of the 1st, 2nd, and 3rd largest industries in each industry increased by 0.38%, 1.46%, and 2.65%, respectively compared to the previous quarter. Currently, there is a preference for "big to big" in the market value of actively managed equity funds, resonating with broad-based ETFs and insurance funds, further driving the interpretation of large-cap leadership styles in the market. Highlights six: Hong Kong stock position significantly increased, Beishui significantly increased holdings in information technology and telecommunications industries. In the second quarter of 2024, the position of Hong Kong stocks in actively managed equity funds significantly increased. As of the second quarter, the scale of holdings of major Hong Kong stocks by actively managed funds was 193.623 billion yuan, an increase of 19.98% from the end of the previous quarter, and the position of Hong Kong stocks increased from 9.33% to 11.62%. In terms of industries, public funds' holdings in the Hong Kong information technology, telecommunications, and financial industries increased compared to the previous quarter, while holdings in the medical and health care, necessity consumption, and non-necessity consumption sectors significantly decreased. From the perspective of major holdings, in the second quarter of 2024, actively managed equity funds significantly increased their positions in the information technology, telecommunications, and financial sectors, with increases of 2.82 pct, 1.37 pct, and 1.08 pct, respectively. Actively managed equity funds significantly reduced their positions in the medical and health care, necessity consumption, and non-necessity consumption sectors, with decreases of -1.84 pct, -1.60 pct, and -1.34 pct, respectively. In terms of major holdings, Tencent maintained its position as the largest major holding in Hong Kong stocks among public funds. As of the second quarter of 2024, the top 5 major holdings in Hong Kong stocks were Tencent Holdings, China Offshore Oil, Meituan-W, China Mobile, and Kuaishou-W, with holdings of 37.568 billion yuan, 22.370 billion yuan, 14.274 billion yuan, 13.085 billion yuan, and 4.387 billion yuan respectively.Billion yuan. Compared to 2024 Q1, among the top 20 weighted stocks in the Hong Kong stock market, the new additions are Samsonite, CGN Power, PetroChina, and China Telecom.In the second quarter, the passive funds continued to increase their holdings, with the market value of A-shares surpassing the 2 trillion yuan mark. The relative share of passive funds in the top 50 heavy-weighted stocks has also exceeded 50%. By the end of the second quarter of 2024, the market value of A-shares held by passive index funds has exceeded 2 trillion yuan, accounting for over 3% of the total market value of A-shares, an increase of nearly 50% compared to the same period in 2023. At the same time, the relative share of passive funds in the top 50 heavy-weighted stocks of equity funds has further increased. By the end of the second quarter of 2024, the share of passive funds in the top 50 heavy-weighted stocks of equity funds (passive index + active equity) has jumped to 51.6%, surpassing that of active equity funds. In terms of scale distribution, current equity ETFs still focus on large-cap leading companies. Currently, broad-based ETFs tracking large-cap indices such as the CSI 300, ChiNext 50, and SSE 50 are still mainstream in the market. By the end of the second quarter of 2024, broad-based ETFs accounted for 69% of the total, with TMT (7%), consumer healthcare (7%), and financial real estate (5%) ETFs leading in terms of share. Among broad-based ETFs, products investing in the CSI 300 account for nearly half of the total, while products investing in leading indices like the CSI A50, SSE 50, and ChiNext 50 together account for nearly 1/4 of the total, indicating that the incremental expansion of passive funds is focused on large-cap stocks. On an individual stock level, by the end of the second quarter of 2024, there were over 36 stocks in which passive funds held more than 5% of the outstanding shares, with 9 of them exceeding 10%, especially companies listed on the ChiNext board such as HG Tech, SMIC, JA Solar, and LQ Technology. Risk warning: This is only a historical data analysis report and does not constitute a recommendation or suggestion for any industry or individual stocks. SMIC, LQ Technology, JA Solar, Zhongwei Company, Kingsoft Office, Transsion Holdings, and HG Tech are market-making companies for Guotai Junan Securities. This article is reprinted from the WeChat public account "XYSTRATEGY", authored by the Strategy Team of Guotai Junan Securities; GMTEight editor: Xu Wenqiang.