Public offering FOF fund managers’ outlook for the second half of the year: looking for a balanced asset allocation anchor with both defense and offense capabilities

◎ Reporter Chen Yue

In the first half of 2026, global markets staged a dramatic “ice and fire on opposite ends” performance driven by synchronized forces from loose liquidity and industry trends: technology stocks represented by AI surged sharply, commodities swung wildly, while other assets stayed in consolidation, waiting for an opportunity to move upward.

In the second half, how can investors find an asset-allocation anchor that is strong on both offense and defense? With this question in mind, reporters from Shanghai Securities News interviewed multiple public-fund FOF fund managers.

Optimistic or cautious?

Although the market’s scenario of structural divergence has been fully played out, equity assets still remain the core focus of asset allocation by FOF fund managers in the second half.

“Equity assets still outperform bonds and commodities. Going forward, we will focus on further performance of technology stocks,” said Li Wenliang, General Manager of the FOF Investment Department at Southern Fund. From the perspective of global equity markets, current valuation levels of A-shares are moderate, and the risk premium is positioned at a historically neutral level. The divergence trend is expected to be absorbed through rotation within growth styles. As risk-diversification options, sectors such as midstream manufacturing and resource-related products, which have relatively solid performance, can be considered.

“We remain optimistic about the performance of A-shares in the future,” said Cheng Zhucheng, a FOF fund manager at Harvest Fund. Entering the second quarter, geopolitical tensions in the Middle East ease, global market risk appetite is restored, and A-shares also gradually become less sensitive to external disruptions. Major broad-based index benchmarks generally rebounded. Expectations for global loose liquidity are warming up. China’s economic operations are steady, and overseas demand shows marginal improvement. Looking ahead, A-shares are expected to benefit from policy support and industry-trend drivers, presenting structural opportunities.

Some FOF fund managers, however, have shifted their view on equity assets from “optimistic” to “neutral with a cautious tilt.” Jiang Hanjin, a fund manager in multi-asset allocation at Xingzheng Global Fund, said that in the first half they reduced positions and adjusted the product structure; in the second half they will continue to take a cautious approach and further optimize the structure.

“Considering that the yield on relatively defensive assets is currently low, and driven by residents’ ‘deposit relocation,’ there is a possibility that the equity market will continue to rise. Therefore, we will gradually reduce our positions when prices are higher, but we will not deviate significantly. In the early period, the growth style driven by business conditions accumulated relatively high excess returns. Moreover, whether in absolute valuation or relative valuation, the growth style driven by business conditions is at a historical high. We can rebalance styles to a certain extent,” Jiang Hanjin said.

Divergence or convergence?

In the second half, can an extreme divergence market tone converge? Can concentrated capital in technology growth sectors flow out to other sectors? In response to these questions, FOF fund managers have provided their respective allocation strategies for the second half.

“In the second half, market styles may move toward balance, and the driver of market performance may shift from incremental liquidity to fundamentals of earnings,” said a person in charge of asset allocation at a large Beijing-based fund company. “On the offensive side, focus on the hard-tech main line driven by an AI super-cycle, and the resource main line driven by price-increase logic, and also appropriately pay attention to Hong Kong stock sectors that have expectations for valuation repair. On the defensive side, focus on high-dividend-yield assets.”

Many FOF fund managers interviewed remain firmly confident in technology stocks.

“Looking ahead to the second half, the technology industry—especially the hard-tech direction—will continue to benefit from strong AI demand and increased capital expenditure,” said Li Wenliang. However, the technology rally is expected to enter the latter half of the uptrend, and volatility may further intensify. Investors should take a rational view of the crowdedness in AI sub-sectors, which are currently at a high level.

Cheng Zhucheng also expects technology stocks to perform well in the second half. He believes that the overall rise in technology stocks—especially the overseas computing-power chain—is driven almost entirely by earnings rather than valuation expansion, and there is still room for further upside.

Some FOF fund managers are more bullish on directions beyond the technology sector.

“Although A-shares performed strongly in the first half, style divergence was relatively extreme: equity assets related to technology rose, while assets related to domestic demand and the dividend theme, which are tied to the traditional economy, saw a pullback. Among them, there are many companies with stable and improving operations and stable free cash flow. After a period of sustained adjustment, their valuations have become more reasonable, and in some cases undervalued. Overall, the value-for-money of the overall allocation is particularly prominent. We believe these assets will have better market performance in the future,” said Yang Yu, a fund manager in asset allocation and FOF investment at China Merchants Fund.

“In the second half, we will mainly maintain allocation to stocks, bonds, and commodities, and may appropriately allocate to overseas equity-type funds,” said Dai Hongkun, a FOF fund manager at Minsheng Jiayin. Dai Hongkun believes: For A-shares, the second-half catch-up upside space for sectors such as new energy, innovative drugs, and consumption—whose upside has been crowded by the technology main theme—may be relatively large. For US stocks, corporate earnings growth is spreading from technology into sectors such as energy and materials, and valuations are within a reasonable range.

Risk or opportunity?

Apart from equity assets, how will other asset classes play out in the second half? FOF fund managers offered their own outlooks.

Regarding the bond market, Yang Yu believes that the medium- to long-term allocation value-for-money is weaker than equities. “In the first half of the year, the yield on 10-year government bonds fluctuated in a range of 1.7% to 1.9%. Overall, the static yield level has been at a historically low level. Volatility has increased clearly, and the Sharpe ratio has fallen significantly. Meanwhile, as the economy bottoms out and stabilizes, the PPI gradually moves out of negative territory and continues to rebound, while CPI maintains mild positive growth. This suggests that domestic interest-rate markets are expected to continue to be affected,” Yang Yu said.

Li Wenliang said that bond credit spreads are relatively low, and the term spread is neutral. Bond strategies will mainly rely on coupon-carry strategies.

Cheng Zhucheng said that bond yields have been relatively volatile, and both the current term spread and credit spread are small. However, investors should be alert to the tail risk of sudden spikes in short-term interest rates.

There may be an opportunity for a rebound in gold prices. In Cheng Zhucheng’s view, US monetary over-issuance and fiscal expansion have led to a relative decline in the US dollar’s credit versus gold. Combined with global central banks’ continued gold purchases, this supports gold prices moving higher. Going forward, global central banks’ gold-buying behavior is likely to continue, and US fiscal issues remain prominent, so gold will likely still have upside room. At the same time, gold may also experience significant pullbacks due to short-term liquidity changes and speculative sentiment. Of course, short-term corrections do not affect the long-term trend.

Yang Yu said that in the long run, US fiscal policy remains in an expansion cycle, and uncertainty in geopolitical conditions still persists, so the gold allocation logic has not changed. In the short run, Yang Yu believes that investors should wait for clear signals of a policy shift from the Federal Reserve.

Dai Hongkun said: Geopolitical uncertainty will cause sharp fluctuations in the prices of oil and gas assets, and the value of medium- to long-term allocation is insufficient. In the second half, the supply-demand pattern may tilt toward a more relaxed direction, but there is not enough momentum to support oil-price increases.

(Editor: Xu Nannan)

Keywords: