Seize the market correction opportunity as some new funds accelerate their "building positions"

The recent market pullback has cooled new fund issuance somewhat, but many fund companies are still launching new products at low levels despite the headwinds. At the same time, many funds newly established in recent days are quickly building their positions. Industry sources say that near-term external disruptions will not change the long-term investment value of China A-shares. The rapid position-building by new funds during market adjustments reflects their optimism about the long-term investment opportunities in China A-shares, and their intent to actively seize opportunities brought by the pullback. However, some new funds are also building positions cautiously and, after establishment, remain on the sidelines.

New fund issuance has cooled somewhat

In recent weeks, the China A-share market has been volatile and adjusting. Compared with before, the number of new fund offerings has cooled. According to Wind data, in the first week of March (March 2–March 6) and the second week (March 9–March 13), respectively 45 new funds (counted by subscription commencement date) and 40 new funds began offering. In the third week of March (March 16–March 20), the number of newly issued funds declined to 25. As of March 26, 22 new funds began offering this week.

Market volatility has, to a certain extent, affected investors’ enthusiasm for subscribing to new funds, but in the recent period some funds have still completed fundraising within a relatively short time. Funds such as Xin Yuan Cycle Rui Xuan and Dongfanghong Cycle Yan Xuan completed fundraising in a single day; the fundraising period for the Fullgoal CSI Hong Kong–Connected Information Technology Composite ETF and Anxin Balanced Zhi Yuan mixed fund was only 5 days. Notably, the fundraising size of Anxin Balanced Zhi Yuan mixed fund reached 2.015 billion units.

Some fund companies choose to launch new products against the tide during market adjustments. Wind data shows that from March 27 to April 4, another 27 new funds began offering.

It is worth mentioning that the CSRC recently approved a new batch of hard-tech themed fund products, totaling 15 products. These include passive funds tracking an “innovation and entrepreneurship” (”ChuangXin”) artificial intelligence index, as well as active funds benchmarked to an index of China’s strategic emerging industries component constituents, focusing on core technology and growth directions in strategic emerging industries. Bank of Communications CICC CSI STAR Market Venture and Entrepreneurship Artificial Intelligence Index fund began offering on March 23. Xingyin CSI STAR Market Venture and Entrepreneurship Artificial Intelligence Index and Fullgoal CSI STAR Market Venture and Entrepreneurship Artificial Intelligence ETF began offering on March 27 and March 30, respectively. The other approved products are expected to start fundraising in succession in the near term.

Different new-fund position-building paces

With the recent market retreat, many newly established equity funds are actively seizing opportunities created by the pullback and building positions quickly. Shanghai Aoshang Medical Select Stock Fund (initiated) was established on March 4; on March 6, the NAV of the A share class had already turned into 0.9999 yuan, suggesting the fund may have started building positions.

Efund Research Smart Selection Stock Fund was established on March 17; on March 20, the NAV of the A share class had already become 0.9988 yuan. On the same day, the NAV of Jiaozi Yuenjian Select Hybrid also changed quickly: on March 20, the NAV of its A share class became 0.9990 yuan. The NAV of the China Universal Wealth Consumption New Opportunity Hybrid (initiated) A share class, established on March 10, became 1.0014 yuan on March 13 and 0.9924 yuan on March 20. Changes in NAV indicate that these new funds may have built positions rapidly shortly after their establishment.

That said, some funds choose to stay on the sidelines. Baijia Baiyu Growth Hybrid (initiated), established on March 19, currently has a NAV still at 1 yuan. The NAVs of newly established funds such as PICC Ruiyi Smart Selection Hybrid, Hua’an Innovation Momentum Hybrid, J.P. Morgan Asset Management Hengrui Select Hybrid, Anxin Balanced Zhi Yuan Hybrid, and others are also still 1 yuan, or they have not started building positions.

Long-term direction for China A-shares unchanged

Industry insiders say that the rapid position-building by new funds during market adjustments stems from their optimism about long-term investment opportunities in China A-shares. Looking ahead, J.P. Morgan Asset Management China Fund says that the short term market has already released a lot of risk, but it is still affected by geopolitical developments, while the medium term outlook remains relatively optimistic. Trends in the AI industry are driving productivity improvements, which in turn promotes growth across many industries. From a positioning perspective, given uncertainty in the current external environment, investors may focus on defensive segments and sub-industries that are less affected by geopolitical shocks: first, upstream energy and raw material sectors, especially those that have been reducing capacity for several years and benefit from directions where supply is hit; second, defensive sectors, especially high-dividend stocks with strong cash flow quality and strong dividend capacity; third, an external demand main line whose fundamentals are not damaged; and fourth, in growth tracks, selecting products that combine industry momentum trends with certainty around earnings delivery.

Wei Fengchun, chief economist at CICC Credit Suisse Jinhe Fund, says that under the broad trend of a technology revolution and industrial upgrading led by AI, geopolitical developments will only change the investment pace and reinforce structural differentiation, but will not change the long-term direction. The current market is in a volatile stage and uncertainties remain. Investors should follow a strategy with stability as the top priority, focusing on certain assets. The “HALO strategy” (heavy assets, low attrition rate) and hard-asset strategies remain effective. Investors currently need to firmly build exposure to hard assets with safety attributes and supply-demand rigidity, such as energy and coal, to build a solid safety cushion for the portfolio. The technology growth direction should not be lightly abandoned; instead, focus on true growth products with real technical barriers and the ability to deliver performance. Key areas include AI infrastructure, advanced computing power, the robotics industry chain, and bio-manufacturing.

Minsheng Jiayin Fund says that geopolitical conflicts shift the market’s core contradiction to supply security and strategic resources, driving the logic from “hedging” to worries about re-inflation. Rising oil prices strengthen inflation expectations and suppress the prospect of Federal Reserve rate cuts, impacting most assets. In the short term, re-inflation trades and delayed Federal Reserve rate-cut expectations caused by sustained upward oil-price movement will affect market risk appetite to a certain extent. In the near term, China A-shares may mainly be in a period of volatility, with clear differentiation in market structure. If geopolitical conflicts ease, risk appetite and liquidity are expected to recover. Overall, under liquidity shocks, the near-term market may be dominated by structural opportunities; it is recommended to pay attention to industry opportunities such as AI and resource-related sectors.

(Editor: Xu Nannan)

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