The scale of active equity funds has stabilized, but institutional pricing power is still changing. In Q3 2024, the positions of various types of funds increased. The position of general stock funds increased by 0.9 percentage points to 88.7% compared to Q2 2024; the position of equity hybrid funds increased by 0.5 percentage points to 86.4%. Major market participants' holdings: As of Q3 2024, the market value of active equity funds' holdings reached 3.2 trillion, temporarily ending three consecutive years of shrinking scale since 2021, but still difficult to become the dominant pricing force of institutions - the market value of insurance holdings reached 3.8 trillion in H1 2024 (including funds), excluding the market value of insurance holdings of 2.1 trillion, is expected to continue to grow in Q3; the market value of stock ETF holdings in Q3 2024 reached 2.7 trillion, being the main incremental force this year; the market value of foreign holdings in Q3 2024 reached 2.4 trillion, seeing a small inflow again. Southbound allocation has returned to its peak, with significant increases in the allocation of ChiNext 50 and Star 50. Funds have increased their allocations to ChiNext 50 and Star 50, driven by core targets brought in by ETF inflows. The allocation to Hong Kong stocks has increased to around 12.5%, approaching the peak allocation of 13% at the beginning of 2021. Among them, Hang Seng Technology has received a significant increase in allocation, reaching a current allocation of 5.8%. Differentiation in sectors: New energy and defense industries have regained attention after being underweighted for a year across all funds, while food and beverage and pharmaceuticals continue to hover at low levels. Excluding thematic funds, the underweighting of new energy and defense industries has persisted for almost a year before receiving increased attention this quarter. New energy was the top industry for increasing positions in Q3, with significant increases in positions in electric power equipment after a year of underweighting, with wind, solar, electric vehicles, and storage all rising. Bottom-up additions, still underweight or neutral, include photovoltaic cell components, silicon wafers, silicon materials, photovoltaic auxiliary materials, and wind turbine systems. This quarter marks the first time since 2016 that food and beverage has returned to a position of underweighting across all funds; pharmaceuticals continue to be underweighted. The clues to fund increases in Q3: still focused on sectors with high economic certainty from the third quarter reports of A-share companies October is traditionally a month with a high correlation between stock performance and earnings. Based on the previews of third-quarter reports from listed companies on the A-share market, sectors with high economic certainty from third-quarter forecasts/reports continue to be in focus for funds: the science and technology industry and export chains remain key sectors attracting attention in Q3. After significant increases in the previous quarter, the allocation to semiconductor technology continued to reach new highs in Q3. Subsectors within the science and technology industry that saw significant increases in positions include semiconductor technology, analog chips, system on a chip (SoC), and semiconductor equipment, while the NV chain saw a decrease in allocation. The allocation to export chains continued to reach new highs (currently oversubscribed by more than 1x), especially industries with high export certainty such as inverters, motorcycles, wind turbine systems, injection molding machines, which saw significant increases in positions by public funds. In addition, some sub-industries showing positive signals from third-quarter reports also saw increases in fund allocations: insurance, leisure food, express delivery, basic chemicals, and more. Clues to fund increases in Q3: testing the waters with policies, funds making attempts based on policy directions From structure to total amount, policies were stepped up and progressed in layers throughout the third quarter, influencing changes in the positions of public funds. Economic cyclical assets have shown a trend of bottoming out in terms of allocation, while still focused on areas driven by policies such as real estate chains, equipment upgrades, and trade-ins; however, for sectors with a larger domestic demand exposure such as broad-base consumption and manufacturing, the market has not yet reversed its divestment trend (e.g. liquor/services/steel). Finally, changes in policy expectations at the end of Q3 also led to some loosening in the allocation of core dividend assets. Assets such as electricity, power coal, operators, and railways and highways saw varying degrees of reduction. After removing stock prices, the electricity sector saw the largest decrease in allocation, with the overallocation ratio falling back to levels below historical averages. Sectors with less selling pressure such as banks, and potential dividend assets with improving industry structures, continued to see increases in positions this quarter, such as banks, solid waste, and more. Overall Conclusion: Main changes in asset allocation across three categories of assets Asset allocation: The market rebound has led to an increase in positions, but redemption pressure still exists. Positions of various types of funds increased in Q3 2024, mainly benefiting from the rise in stock prices, while the decline in shares and the pressure of net redemptions from funds still persist. Sector allocation: Significant increases in allocations to ChiNext, nearing historical high for Southbound allocations. Funds reduced positions in the Shanghai and Shenzhen 300 and small-cap stocks, while increasing positions in the ChiNext 500 and STAR Market, and significantly increasing positions in ChiNext. Allocation to Hong Kong stocks increased to around 12.5%, nearing the peak allocation of about 13% at the beginning of 2021. Hang Seng Technology received a significant increase in allocation, reaching a current allocation of 5.8%. Industry allocation: Electronics remain stable at a high level, while new energy sees a significant increase. After adjusting for stock price increases, photovoltaics, batteries, and home appliances saw the most significant increase in positions in Q3, with significant reductions in positions in electricity, liquor, and securities. Economic Growth Class: Science and technology industries maintain high allocations, with a focus on new energy and defense. This quarter saw the largest allocation changes for economic growth assets, with new energy becoming the top industry for single-quarter increases in Q3. After being underweighted across all funds for almost a year, the market has started paying attention to fundamental changes in specific sectors, with wind, solar, electric vehicles, and storage all seeing increased positions. Bottom-up additions still underweight or neutral include photovoltaic cell components, silicon wafers, silicon materials, photovoltaic auxiliary materials, and wind turbines. TMT remains at high allocations, with continued record allocations to science and technology chips. Defense industries saw increased allocations this quarter after being underweighted across all funds for almost a year. The allocation to pharmaceuticals continues to decline, with the allocation to pharmaceuticals across all funds (excluding pharmaceutical funds) dropping to around 2%, returning to historically low levels. Economic Growth Class: Export chains, as a structurally high-growth sector, continue to receive increased allocations. The overall allocation to export chains reached a historical high of 12.8%, including various sectors such as hand tools/power tools, household goods, engineering machinery, textiles, cross-border e-commerce, tires, motorcycles, automotive components, inverters, all seeing varying degrees of increased allocation. Stable Value Class: Resources and electricity see decreases, while banks and solid waste see increases. Global pricing-led resource sectors unavoidably face pressure from overseas expectations.The impact of the movement, due to the uncertainty of the global economy and the US presidential election, has led to a reduction in the allocation of copper, oil, and gold from historical highs. Changes in policy expectations at the end of Q3 have also loosened the allocation of some core dividend assets, with varying degrees of reduction in stocks such as electricity, thermal coal, utilities, and railway highways. Excluding stock prices, the electricity industry has seen the largest reduction in allocation, with the over-allocation ratio returning to a position below the historical median. Conversely, banks, which have relatively light chip pressure, and potential dividend targets with improved industry structure, have continued to be increased by funds this quarter, such as banks and solid waste.[Economic Cycle Category]: Policy-guided reallocation of positions. At the end of the third quarter, policy expectations led the way, with public funds also increasing their holdings in [Economic Cycle Category] assets at the bottom. The focus of the increased positions was more on the "policy-driven" areas, such as real estate chains, equipment upgrades, and trade-ins for new ones. However, for domestically-driven varieties boosted by fiscal stimulus, the market has not yet reversed the trend of reducing positions (such as liquor/services, etc.). Asset Allocation: Market warming leads to increased positions, redemption pressure still present In Q3 2024, the positions of various types of funds increased. The equity fund positions increased by 0.9 percentage points to 88.7% compared to Q2 2024; the mixed equity funds position increased by 0.5 percentage points to 86.4%; flexible allocation fund positions increased by 1.6 percentage points to 74.7%. The increase in equity positions was mainly due to the rise in stock prices, while the decrease in shares and the pressure of net redemptions of funds still exist. The stock holdings of mixed equity funds increased by 8.7%, ordinary equity fund holdings increased by 11.0%, and flexible allocation fund holdings increased by 5.9%. Although fund holdings increased, share declines have not been reversed yet, with overall fund shares decreasing by 3.4 percentage points: mixed equity fund shares decreased by 3.4%, ordinary equity fund shares decreased by 2.7%, and flexible allocation fund shares decreased by 3.7%. By the end of Q3 2024, the equity funds' holdings had risen to 3.2 trillion, ending the continuous downward trend since 2021. As of Q3 2024, the market value of actively managed equity funds was 3.2 trillion, insurance (including funds, H1 data) value was 3.8 trillion, foreign investments value was 2.4 trillion, and stock ETFs value was 2.7 trillion (a 50% increase from the end of 2023). Sector Allocation: Significant increase in positions in the Growth Enterprise Market, near historical high in Southbound allocations In Q3 2024, all types of funds reduced positions in the Shanghai and Shenzhen 300 Index, while increasing positions in the CSI 500 Index. The allocation ratio to the Shanghai and Shenzhen 300 Index decreased by 0.08 percentage points from 62.34% in Q2 2024 to 62.26% in Q3 2024 (over-allocated by 12.81%); the allocation ratio to the CSI 500 Index increased by 1.0 percentage points from 18.9% in Q2 2024 to 19.9% in Q3 2024 (over-allocated by 3.30%). The allocation ratios to the Growth Enterprise Market and the Sci-Tech Innovation Board increased, with the former receiving significant additional positions. The allocation ratio to the Growth Enterprise Market increased by 2.61 percentage points from 17.41% in Q2 2024 to 20.02% in Q3 2024 (over-allocated by 3.33%); the allocation ratio to the Sci-Tech Innovation Board increased by 0.8 percentage points from 9.7% in Q2 2024 to 10.5% in Q3 2024 (over-allocated by 3.74%).In the last quarter, the sector with the largest increase in position holding often faces short-term pressure. In the previous quarter, public mutual funds significantly increased their holdings in the electronics sector, but the performance in Q3 still did not escape this pattern.However, for industries with subsequent orders and industrial trends confirmation (such as optical modules in Q2 and electronics in Q4), the holding crowding disturbance on stock prices lasts within one quarter, and even has no substantial impact on the stock prices of individual leading companies. The biggest change in asset allocation for this quarter in the "prosperous growth" category is that new energy has become the top industry in terms of single-quarter increase in holdings in Q3. After being underweight for a year in the overall market (excluding theme funds), the market gradually pays attention to the subtle changes in the fundamentals of segmented key links, with wind, light, vehicles, and storage all seeing increases in holdings. Structurally, the segments that are starting to increase positions at the bottom, and are still underweight or evenly positioned, are photovoltaic cell modules, silicon wafers, silicon materials, photovoltaic auxiliary materials, and wind turbine units. The TMT industry chain is basically maintained at a high allocation level, with innovation in semiconductor chips continuing to reach new highs. The allocation proportion for electronics decreased slightly by 0.5% compared to the previous quarter and is still ranked first in terms of allocation among all industries. Meanwhile, the allocation proportion for telecommunications continues to slightly increase. In terms of segmented industry chain links, there were mainly increases in holdings for innovative semiconductor chips, analog chips, SOCs, and semiconductor equipment, while there were reductions in holdings for NV chains. After almost a year of being underweighted in the overall market, the defense industry also saw an increase in holdings this quarter. Structurally, the main increase was in aviation equipment, military electronics, and ground weapons. The allocation proportion for pharmaceuticals continues to decline, and after excluding pharmaceutical funds, the overall allocation for pharmaceuticals is approximately 2%, returning to historically low levels. There are signs of continuous increases in basic pharmaceuticals and bottom increases in CXOs. In the "prosperous growth" category, the export chain as a structurally high-growth industry in the third quarter, continues to increase holdings at a high level. Taking typical representative companies as samples, the overall allocation proportion for the export chain reached a new historical high of 12.8%; excluding stock price factors, funds continued to actively increase holdings in Q3. Structurally, sectors such as hand tools/power tools, home appliances, engineering machinery, textiles, cross-border e-commerce, tires, motorcycles, automotive components, and inverters all saw varying degrees of increased allocations. In the "stable value" category, resources and power decreased while banks and solid waste increased. Dividend assets saw differentiation in Q3. The globally priced resource industry is inevitably affected by overseas expectations, with copper, oil, and gold allocations being reduced from historical highs due to global economic uncertainty and the US presidential election. Changes in policy expectations at the end of Q3 also led to some loosening of core dividend asset allocations, with varying degrees of reductions in power, power coal, operators, and railways. Post-excluding stock prices, power saw the largest reduction in allocation, with an over-allocation returning to historically low levels. Banks, which previously exhibited a "sell when it rises" pattern, saw real increases in holdings this quarter. Some dividend spread varieties optimized for reducing expenses and improving FCFF bottom orders also saw increases in holding in 1-2 quarters, such as solid waste, polyurethane, titanium dioxide, etc. In the "economic cycle" category, there was a rebalancing of positions guided by policy expectations. At the end of the third quarter, with policy expectations leading the way, public funds also increased positions at the bottom in "economic cycle" assets, with a focus on "policy-driven" areas such as real estate chains and equipment upgrades & trade-ins. Conversely, for purely domestic demand sectors driven by fiscal spending, the market has yet to reverse its reduction trend (such as liquor/service industries, etc.). Public funds increased positions at the bottom of the real estate chain, such as real estate (first time in 7 quarters), consumer building materials (continuously increased for two bottom quarters), and kitchen appliances. In addition, sectors related to the equipment upgrades & trade-ins that have already made efforts in the third quarter, such as home appliances, passenger cars, and heavy trucks, also saw various levels of public fund increases. Among them, home appliances were also driven by external demands and represented a convergence of internal and external demands, with continuous increases in holdings over 7 quarters, approaching historical highs. For broad spectrum consumption goods that still require further confirmation of fundamentals and have larger domestic exposures, funds continue to reduce their positions, such as liquor, service industry (tourism and scenic spots/medical beauty/cosmetics/general retail), etc. In particular, after excluding theme funds, the overall allocation for food and beverage has returned to underweight, the last time this happened was in Q3 2016. Individual stock allocations: Consensus among holdings has increased. Among the top 10 heavy stock positions in Q3 24, the proportion of holdings was approximately 20.2%, indicating an increase in concentration compared to the previous quarter. Among the companies with the most heavy positions, new entrants to the top ten heavy positions were Sungrow Power and BYD, while China National Offshore Oil Corp. and Mindray Medical dropped out of the top ten. Excluding the impact of stock price changes, the most actively added stocks by discretionary equity mutual funds in Q3 24 were Midea Group, Sungrow Power, and China Ping An, etc. The most actively reduced stocks in Q3 24 were China National Offshore Oil Corp, Industrial Fulian, and Luzhou Laojiao, etc. Risk Warning: The third-quarter report of funds only discloses the top ten heavy positions, reflecting incomplete information; the allocation proportion of stocks in flexible allocation funds is unstable; fund allocation only reflects past information, with limited significance for future guidance; the increasing size of some investment industry-specific funds (such as pharmaceutical funds, etc.) will have a certain impact on industry allocation data. This article was sourced from the "Guangfa Strategy" public account, edited by GMTEight: Jiang Yuanhua.