Artificial Intelligence sector leads the gains, over 500 active equity products

Since the beginning of the Year of the Dragon, the A-share market has maintained a trend of fluctuating upward movement. As of the close on February 26th, the Shanghai Composite Index fell by 0.93%, failing to achieve a nine-day winning streak, but it has still accumulated a rise of over 10% since the rebound on February 6th. In this round of market activity, all 31 first-level industries of Shenwan have achieved increases, with the computer, media, and other artificial intelligence-related sectors leading the gains.

Benefiting from this, actively managed equity products heavily invested in the aforementioned sectors have taken the lead in "recouping losses," with the net value increase during the period ranking at the forefront, and more than 500 products have seen an increase of over 20% during the period. In the continuous rebound market, the performance gap between the best and worst actively managed equity funds has already exceeded 50 percentage points. So, as the market sentiment warms up, is it a good time to lay out for the AI sector that has been surging continuously?

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A wave of product performance "recouping losses"

Recently, the A-share market has seen a rebound. As of February 26, 2024, the Shanghai Composite Index, Shenzhen Component Index, and CSI 300 have risen by 10.17%, 13.83%, and 12.1% respectively during the period. Looking at industry performance, all 31 first-level sectors of Shenwan have seen a general increase.

There are 23 industry sectors with a rebound exceeding 10%, among which the computer sector leads with a 27.35% increase during the period, and the cumulative gains of the media, machinery equipment, communication, electronics, and defense military industries all exceed 20%; banks and public utilities have seen a smaller rebound of less than 8%.

Benefiting from the market's recovery, the net value of actively managed equity fund products has risen across the board. Wind data shows that as of February 23rd, excluding new products established this year, among the 7508 comparable actively managed equity funds (including ordinary equity, flexible allocation, stock-biased hybrid, and balanced hybrid products; different shares are calculated separately, the same below), 7494 products have seen a positive return since February 6th, with a "recouping losses" ratio of over 99%.

Among them, 515 products have seen a rebound in net value of over 20%, including 22 products with a net value return of over 30% during the period. Among them, Penghua Carbon Neutrality Theme A/C, as the product with the highest return during the period, has a return rate of 37.59% and 35.58% respectively; Penghua CSI Hong Kong and Macao Emerging Growth A follows closely with a return rate of 35%.

The reporter noticed that these three products are all managed by fund manager Yan Siqian. Looking at the latest holdings from the 2023 Q4 report, half of the top ten heavy holdings of the aforementioned products overlap, and are mainly focused on the machinery equipment industry. This is also one of the leading sectors in this round of market rebound, providing a lot of help for the rise in fund net value.

Among them, companies such as Zhejiang Haideman (688577.SH), Luobot Technology (300757.SZ), and Kelei Sensing (603662.SH), which are heavily invested in and have seen an increase of over 50% during the period, belong to small and medium-sized stocks in the technology sector. This is also one of the important directions for the rebound in performance this time. Recently, with the emergence of Sora, the AI technology-related sectors have been surging, and actively managed equity products with high net value during the period may also benefit from the market's feedback.

For example, products such as Western Li De New Power A/C, Debang Stable Growth A/C, and Western Li De Digital Industry A/C have all "recouped losses" of over 32% in this round of market activity. These products all heavily invested in sectors related to artificial intelligence concepts such as media and computers in the fourth quarter of last year.After this round of rebound, many actively managed equity products have "recouped their losses." Wind data shows that as of February 23, 1,468 funds have posted positive cumulative returns this year, compared to 270 on February 5. The top performer is the Wanjia Selected A managed by fund manager Huang Hai, which has risen by 17.38% since the beginning of the year.

Additionally, among the funds that have rebounded by more than 20%, 34 actively managed equity products have already turned positive for the year, such as Western Digital Industry A/C, AVIC Opportunities Leading A/C, and Morgan Stanley Digital Economy A/C, some of which are associated with keywords like "digital," "intelligent," and "technology."

However, three-quarters of actively managed equity products still have varying degrees of year-to-date performance decline, with 106 products having a cumulative drop of more than 20%. The largest decline is seen in Jinyuan Shun'an Industry Selection A/C, with a year-to-date return exceeding 36.9%. This means that in this rebound market, the gap between the top and bottom actively managed equity fund products has widened to over 54 percentage points.

Is it the right time to position?

Overall, the artificial intelligence (AI) related sectors can be considered the first "big red packet" trend of the Dragon Year, with related upstream and downstream markets intensifying, becoming one of the new forces to help the market counterattack. Data shows that the Sora Concept Index (8841756.WI) and the China Securities Artificial Intelligence Industry Index (931071.CSI) rose by 38.14% and 24.86% respectively from February 6 to 26.

"The recent comprehensive market rally is something that has not been seen since the second quarter of last year, indicating that the continuous decline before the festival was an over-adjustment, and the current situation is a correction of the pre-festival over-adjustment," a Morgan Stanley fund person told First Financial Journal, saying that in the short term, the market objectively needs to consolidate after a rapid rise. However, the continuous rebound in the previous market means that the probability of establishing the previous bottom is very high, and the market's money-making effect is beginning to be repaired.

In the view of the aforementioned person, sectors represented by AI, such as technology, high-end manufacturing, and pharmaceuticals, are worth looking good at, and companies with stable operations, abundant cash flow, and the ability to increase dividends still have good allocation value.

"The progress of new technology empowerment such as AI has exceeded market expectations, and new applications like Sora continue to drive the strong performance of technology themes. The continuous rebound has preliminarily verified the 'three twists and turns' rebound expectation," a fund person from East China also told the reporter, saying that in the medium term, there is no need to worry about whether the market has stepped from rebound to reversal at the current point, and it is expected to be verified after more policy directions are set in March.

At the same time, he also said that under the influence of the adjustment of weighted blue chips, the A-share market had a slight pullback on February 26, but overall, there was no obvious loss effect, and the volume was slightly increased compared to last Friday, and the market as a whole is still in a benign structure, suggesting to focus on the rotation opportunities in the direction of technology stocks.

So, what impact does the development of large AI models have on chips and the industrial cycle? Song Weiwei, the拟任 fund manager of the forthcoming China Europe China Securities Comprehensive Index Software Development Index, told the reporter: "The essence of the technological industry's innovative changes is that computing power has become the new era's productive force. Nowadays, chips are no longer just an electronic component, a commodity; they are a provider of infrastructure."Song Weiwei believes that with the breakthrough of general-purpose large models in artificial intelligence, internet giants will generate a substantial demand for computing power chips in the future. The capital expenditure of these internet giants will essentially translate into revenue for computing power chips. It is highly probable that the new cycle will be driven by servers, and the driving force of the semiconductor cycle may also shift from consumer (2C) demand to business (2B) demand.

From the current vantage point, investment research personnel from China Merchants Fund told reporters that, benefiting from the market's emotional recovery, sectors such as TMT, which represent oversold small and medium-sized stocks, are performing at the forefront. This is closely followed by cyclical and high-dividend sectors like finance and real estate. The reduction of the 5-year LPR, combined with financial data in January that exceeded expectations, has accelerated the repair of risk appetite, allowing the market to return to a window for bullish positions.

"Looking at the medium term, various indicators such as the valuation and risk premium of A-shares are still at historical lows. If economic expectations continue to be revised upwards, A-shares will enter a medium to long-term value configuration range," said the personnel. Based on this, they expressed that they will focus on the underlying value of high-dividend sectors amid the shift in economic growth and the direction of technology growth that aligns with industry trends.