Foreign investment accelerates deployment; QFII is optimistic about structural opportunities in A-shares

Questioning AI · What is the logic behind foreign investment optimism in A-shares amid geopolitical conflicts?

As the annual reports of A-share listed companies are being released in bulk, the investment movements of the “smart money” QFII (Qualified Foreign Institutional Investors) are emerging. The latest data shows that as of April 2, when this report was published, 1,206 A-share listed companies have disclosed their 2025 annual reports, among which 202 companies have QFII among their top ten circulating shareholders. Overall, QFII holdings show a dual characteristic of “industry diversification and high new entry rate of individual stocks,” reflecting active exploration and continuous deployment of overseas institutional investors into structural opportunities in the A-share market.

According to Wind statistics, as of the time of this report, the 202 A-share listed companies heavily held by QFII collectively hold 1.05B shares, with a total market value of about 23.02B yuan. Compared to the third quarter of 2025, by the end of 2025, only 33 companies saw reductions by QFII, 43 companies experienced increased holdings, 7 maintained unchanged positions, and the rest were all new entries. This also means that in the fourth quarter of 2025, among the A-share companies heavily held by QFII, the number of newly entered companies reached 119, accounting for nearly 60%.

From an industry perspective, QFII holdings are relatively diversified, with the 202 companies they heavily hold distributed across 33 industries, among which electrical equipment, machinery, and chemicals are the key focus areas, with the highest number of listed companies in their respective industries.

In terms of market value of holdings, the data similarly shows the diversification of QFII’s layout. As of now, the top five companies by market value of QFII holdings are Hongfa Holdings, China Satellite, Hawkeye Group, Baofeng Energy, and China Satcom. Among these, QFII’s latest holdings in Hongfa Holdings, China Satellite, and Hawkeye Group each exceed 1 billion yuan, at 1.27B, 1.25B, and 1.28B yuan respectively. A total of 59 listed companies have QFII holdings exceeding 100 million yuan.

Looking at the rebalancing trajectory, in the fourth quarter of 2025, QFII’s increased positions focused on high-end manufacturing and hard technology sectors, with keywords such as “industry leaders,” “performance certainty,” and “margin of safety” guiding their rebalancing decisions.

Specifically, Wind data shows that, based on the disclosed 2025 annual reports of listed companies, 13 companies had new holdings of over 10 million shares in the fourth quarter of 2025, including Hongfa Holdings, Tianhai Defense, China Satcom, Sanhuan Group, and Tongda Shares. Among them, the relay industry leader Hongfa Holdings was newly invested by Merrill Lynch International Limited, Taibai Investment Limited, and Swiss United Bank Group, with a combined new holding of about 41.7 million shares; shipbuilding and defense equipment company Tianhai Defense was newly invested by Swiss United Bank Group and Goldman Sachs International, with a new holding of about 22.37 million shares; China Satcom, which mainly operates satellites and space infrastructure, was newly invested by Swiss United Bank Group, with a new holding of about 19.83 million shares.

On the institutional level, different QFII holdings preferences show differences. European and American foreign investment banks such as Barclays Bank and Swiss United Bank Group follow a “broad net” logic, each adding new holdings in more than 10 stocks. Middle Eastern sovereign funds, represented by the Abu Dhabi Investment Authority, tend to hold long-term positions, further increasing their holdings of Baofeng Energy in the fourth quarter of 2025, with a total holding of 44.81 million shares, after four consecutive quarters of increasing their stake in the company.

From the perspective of QFII’s holdings, as of now, 25 QFII institutions have a latest stock market value exceeding 100 million yuan. Among them, six institutions hold over 1 billion yuan, including Swiss United Bank Group, Goldman Sachs International, Abu Dhabi Investment Authority, Morgan Stanley International, The Goldman Sachs Group, Inc., and Barclays Bank Limited.

Recently, due to geopolitical conflicts, the A-share market has experienced some volatility, but overall foreign institutional investors remain optimistic, believing that the fundamentals of the A-shares are still solid, and the previous adjustments may present a window for medium- to long-term deployment.

“Although there have been some fluctuations in China’s capital markets recently, looking back over the past few years, the market volatility caused by geopolitical conflicts has been more driven by sentiment rather than fundamental changes. From the perspective of energy security, the recent geopolitical conflicts and resulting energy price fluctuations have had a relatively limited impact on China,” Li Changfeng, head of market strategy at Lianbog Fund, told reporters. Investors can view China’s market performance from a longer-term asset allocation perspective, focusing on the core factors driving long-term returns in the capital markets—namely, corporate fundamentals.

“Continuing to increase allocation to China’s energy-related sectors is a wise move,” said Zhao Yaoting, global market strategist for Asia-Pacific at Invesco. Despite headwinds in global economic growth, China has formed a large-scale, diversified industrial structure, demonstrating strong resilience in facing extreme macroeconomic environments worldwide.

UBS Wealth Management’s Chief Investment Officer Office (CIO) also stated that the current correction in China’s stock market may have gone too far, and investors have an opportunity to increase holdings of high-quality Chinese AI stocks at lower valuations. The firm expects MSCI China’s EPS (earnings per share) growth rate for this year to be about 13%, with technology sector profits potentially growing by 20% to 25%. Policy support for AI development and technological innovation remains, and as market sentiment and fundamentals improve, earnings, valuations, and positions are expected to gradually rebound.

A Standard Chartered research report also indicates that with the development of artificial intelligence, the valuation re-rating potential of China’s tech innovation industry is worth关注. A series of supportive policies will also help improve the asset returns of state-owned enterprises and encourage companies to increase dividends or share buybacks.