Same Slogan, Four Different Playbooks
TREE NEWS reports: The first batch of third-quarter 2026 fund reports has been disclosed, and the headline is not the shared optimism but the vast gap in execution. Excluding one bond index fund, four active equity products published quarterly updates. All four expressed long-term confidence in equities, yet their excess returns ranged from +9.71 percentage points to −20.80 percentage points — a 30.51-point spread between best and worst.
The divergence stems from a sharply split market. Hong Kong equities rallied, with the Hang Seng Index up 7.57%, the Hang Seng Healthcare Index surging 25.83%, and the Hang Seng Biotech Index jumping 31.69%. Mainland A-shares moved the opposite way: the Shanghai Composite fell 6.16%, CSI 300 dropped 12.49%, and growth-heavy ChiNext and STAR 50 tumbled 27.80% and 30.70%, respectively. The broad Wind All A index lost 13.3%.
Winners and Losers by Exposure
That split explains much of the absolute performance gap. A fund heavily allocated to Hong Kong healthcare rose 18.49%, riding the healthcare rally. Another focused on semiconductors and precision components fell 31.65%, mirroring the STAR 50 decline.
Among the four, Jixin Shenzhen Growth delivered the only near-double-digit excess return over the full quarter, despite a negative absolute return. Its A-class net asset value fell 3.54% while its benchmark dropped 13.25%, producing +9.71 points of excess return. The manager added battery, diagnostics, automaker, auto-parts, and ophthalmic-device names, aligning with a stated preference for companies with long-term core competitiveness and reasonable valuations.
Dongcai Agricultural Select, launched on August 18, 2026, built a 92.19% equity position in just 44 days and returned +2.77%, beating its benchmark by 6.12 points. Its top holdings are concentrated in hog farming, poultry, feed, and veterinary medicine, with the manager explicitly favoring resilient leaders and avoiding companies with major operational risks at the bottom of the pig cycle.
Jixin Select Growth was the worst performer, down 31.65% and trailing its benchmark by 20.80 points, tracking the STAR 50’s fall. Yet it saw net subscriptions of 51 million shares, suggesting some investors bought the dip. The manager trimmed front-end equipment and added core components for lithography processes, arguing that the AI upcycle has not systematically cooled and that the macro environment does not support a major, long-lasting style rotation.
Southern Hong Kong Healthcare rose 18.49% but cut its equity position from 78.74% to 59.21%, taking profits after the rally. It increased stakes in innovative drug names, with one holding up 195.3%, while acknowledging that after the recent rebound, broad-based valuation expansion is unlikely.
Market Implications
For equity investors, the reports underscore that a generic ‘long-term bullish’ stance says little about near-term positioning. The wide dispersion reflects sector and regional bets, not just stock picking. The Hong Kong healthcare rally and A-share growth selloff created a 30-point performance gap among managers with similar rhetoric.
The divergence also highlights style rotation risk. Managers remain split on whether the AI-driven growth trade can resume or whether a deeper rotation is underway. That uncertainty could keep volatility elevated in growth-heavy indices such as ChiNext and STAR 50, while Hong Kong healthcare and biotech may stay supported by innovation-driven demand.
For bond and currency markets, the reports offer little direct signal, but the equity market’s internal split may influence risk appetite and fund flows. Continued outflows from A-share growth into Hong Kong and defensive sectors could weigh on the yuan and on domestic growth expectations, while supporting Hong Kong-listed assets.
Key Takeaways for Investors
- Do not treat ‘long-term bullish’ as a positioning signal; examine actual holdings, sector tilts, and cash levels.
- Regional and sector allocation drove most of the return dispersion this quarter, more than individual stock selection.
- Managers are divided on the durability of the AI and growth trade, so expect continued volatility in growth indices.
- Profit-taking in Hong Kong healthcare suggests some managers see limited near-term upside after the sharp rally.
- New money flowing into a badly performing fund shows contrarian interest, but timing such bets remains risky.
