Left-hand resources, right-hand technology, private equity welcomes May with an optimistic attitude

Shanghai Securities Journal Reporter Ma Jiayue

Latest statistics from Private Equity PaoPao.com show that in May, the PaoPao.com China Hedge Fund Manager A-Share Confidence Index further increased compared to April. Additionally, by the end of April, the average position of stock subjective long-only private equity funds rose to over 77%, with 66% of private funds holding positions exceeding 80%. Industry insiders believe that as the Middle East geopolitical tensions marginally ease, and under low interest rate environments with increasing capital inflows into equity assets, structural market trends are expected to continue, with technology sectors that have proven performance and resource commodities with supply constraints worth attention.

Full Position Private Equity Share Increase

Latest statistics from PaoPao.com show that in May, the PaoPao.com China Hedge Fund Manager A-Share Confidence Index was 123.79, up 2.4% from April.

From the position perspective, by the end of April, the average position of stock subjective long-only private equity funds was 77.45%, up 0.87 percentage points from the end of March. Private equity funds with positions of 50% or more accounted for 93.5%, an increase of 1.5 percentage points month-on-month. Among them: 25.1% of private funds were fully invested or leveraged, up 0.9 percentage points; private funds with positions over 80% (excluding full positions) accounted for 40.9%; private funds with positions between 50% and 80% (excluding 80%) accounted for 27.5%.

Additionally, regarding position adjustment plans, private equity’s May position increase/decrease investment plan index was 111.69, up 1.8% month-on-month. Among them: 2% of fund managers plan to significantly increase positions, up 0.5 percentage points; 26.2% plan to add positions, up 0.8 percentage points; 65.3% plan to maintain their current positions; only 6.5% plan to reduce or significantly reduce positions, down 0.8 percentage points.

Optimistic Expectations for Equity Asset Performance in May

Behind the increasing number of private equity firms choosing full positions or planning to add positions is an optimistic outlook for the performance of equity assets in May.

According to private equity data, the confidence index for the trend of the A-share market in May was 131.85, up 2.4% from April. Among respondents: 4% of private fund managers were extremely optimistic about the market outlook, and 58.9% were optimistic.

XingShi Investment analysis states: On one hand, the marginal easing of Middle East geopolitical conflicts has opened a window for risk appetite recovery, and since April, market focus has refocused on economic fundamentals and industry trends; on the other hand, under the combined effects of proactive policies and improved endogenous momentum, corporate profits in the first quarter have significantly rebounded, and the logic of performance-driven growth continues to strengthen. Under energy shocks, China’s supply chain competitiveness and cost advantages will continue to stand out. The profitability of some high-growth trend industries in April has been validated, and moving forward, with continued price improvements and transmission, profit growth is expected to spread to more industries, further revaluing Chinese equity assets.

“Two-Handed” Approach to Technology and Resources

From an offensive perspective, technology and resource sectors are highly favored by private equity.

TaiYang Asset frankly states that the expanding demand for reasoning computing power brought by Agent is shifting the AI market from thematic trading to performance realization. As long as the supply-demand tension in the hardware industry chain of computing power does not significantly ease, sectors such as communications, electronics, semiconductors, and related high-end manufacturing still have ongoing value for tracking and layout. Moreover, although in April, the market’s resource pricing fluctuated between risk aversion, dollar expectations, and demand forecasts, the supply constraints and re-inflation logic of resources have not disappeared. If external shocks stabilize marginally, lagging sectors still have opportunities for catch-up.

Qinghequan Capital states that it is optimistic about two major fields: upstream resources and AI industry chain. Regarding upstream resources, the shift upward in energy prices is more favorable for coal, oil, and other resource industries. The continued increase in global AI investment will also bring additional demand for electricity and basic metals; Regarding the AI industry chain, the AI industry trend is relatively clear, with both overseas giants and domestic industry chains continuously developing, core chip companies and major supply chain companies have significant growth potential.