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

With the concentrated disclosure of annual reports by A-share listed companies, the investment moves of foreign “smart money” QFIIs have come into view. According to the latest data, as of April 2 when the reporter’s copy was issued, 1,206 A-share listed companies have disclosed their 2025 annual reports, and among the top ten circulating-share holders of 202 companies, QFII has appeared. Overall, QFII holdings show the dual characteristics of “industry diversification and a high rate of new positions in individual stocks,” reflecting that overseas institutional investors are actively exploring and continuously positioning themselves for structural opportunities in the A-share market.

According to Wind statistics, as of the time the reporter’s copy was issued, the 202 A-share listed companies heavily held by QFII collectively hold 1.052 billion shares, with a total market value of approximately RMB 23.017 billion. Compared with the third quarter of 2025, as of the end of 2025, only 33 companies saw QFII reduce positions, 43 companies were added to, 7 companies had holdings maintained unchanged, and the remainder were all new positions. This also means that in the fourth quarter of 2025, among the A-share listed companies with QFII’s heavy positions, the number of newly added QFII companies was 119, accounting for nearly sixty percent.

From an industry perspective, QFII holdings are relatively diversified. The 202 heavily held companies are distributed across 33 industries, with sectors such as electrical equipment, machinery, and chemicals becoming key areas of focus for QFII, and the industries with the most listed companies are those within QFII’s focus.

In terms of holding market value, the diversified layout characteristics of QFII are also evident. As of now, the top 5 companies by QFII holding market value are Hongfa Shares, China Satellite, Omnivision Technologies, Baoqing Energy, and China Satellite Communications. For Hongfa Shares, China Satellite, and Omnivision Technologies, the latest QFII holding market values each exceed RMB 1 billion: RMB 1.268 billion, RMB 1.248 billion, and RMB 1.280 billion, respectively. A total of 59 listed companies have QFII holding market value exceeding RMB 100 million.

Judging from the rebalancing track, in the fourth quarter of 2025, the QFII position-adding direction was concentrated in the high-end manufacturing and hard-tech tracks. Terms such as “leading companies in sub-industries,” “earnings certainty,” and “margin of safety” became keywords for rebalancing.

Specifically, according to Wind data, based on the currently disclosed 2025 annual reports of listed companies, in the fourth quarter of 2025 there were 13 companies in which QFII added positions of more than 10 million shares, including Hongfa Shares, Tianhai Defense, China Satellite Communications, Huanhuan Group, Tongda Shares, and others. Among them, after three institutions—Merrill Lynch International Inc., Taibai Investment Co., Ltd., and UBS Group—added new positions, the electrical appliance industry leader Hongfa Shares saw QFII’s heavy position reach about 41.70 million shares. Tianhai Defense, a shipbuilding general contracting and defense equipment company, saw positions newly added by UBS Group and Goldman Sachs International; its heavy holding is about 22.37 million shares. China Satellite Communications, which is mainly engaged in satellite operations and space infrastructure, saw new positions added by UBS Group, with a heavy holding of about 19.83 million shares.

At the institutional level, different QFII holdings preferences show differences. European and U.S. investment banks and foreign investment institutions such as Barclays Bank Limited, UBS Group, and Morgan Stanley International Corporation follow the “spray-and-pray” logic, and have newly entered positions and become heavy holders in more than 10 stocks. Middle Eastern sovereign funds represented by Abu Dhabi Investment Authority, by contrast, tend to hold long-term. In the fourth quarter of 2025, they further increased holdings of Baoqing Energy, bringing total holdings to 44.81 million shares, after previously increasing the position for four consecutive quarters.

Looking at QFII’s holdings, as of now, there are 25 QFII institutions with the latest holding market value above RMB 100 million. Among them, 6 institutions have holding market value exceeding RMB 1 billion, namely UBS Group, Goldman Sachs International, Abu Dhabi Investment Authority, Morgan Stanley International Corporation, The Goldman Sachs Group, Inc., and Barclays Bank Limited.

In recent times, due to geopolitical conflicts, the A-share market has seen some fluctuations. However, foreign-invested institutions as a whole remain optimistic, believing that A-share fundamentals are still sound, and that the previous pullbacks may have created a window for medium- to long-term positioning.

“Although there have been some fluctuations in China’s capital markets recently, when looking back at the market fluctuations caused by geopolitical conflicts over the past few years, more of them have been driven by sentiment rather than changes in fundamentals. From the perspective of energy security, the energy price fluctuations triggered by recent geopolitical conflicts have had a relatively limited impact on China,” Li Changfeng, head of market strategy at the CIO Office of UBS Wealth Management, told reporters. Investors can view China’s market performance from a longer-cycle asset allocation perspective, focusing on the core factors that drive long-term capital market returns—namely company fundamentals.

“Continuing to increase allocations to China’s energy-related sectors would be a wise move,” Zhao Youting, global market strategist for the Asia Pacific region at Invesco, said. Despite headwinds in global economic growth, China has already formed a large-scale, diversified industrial layout and possesses strong resilience in responding to extreme global macro environments.

The CIO Office of UBS Wealth Management also indicated that the current adjustment in China’s stock market may have already been overdone. Investors may have an opportunity to add high-quality Chinese AI stocks at lower valuations. The institution expects that MSCI China’s EPS (earnings per share) growth this year will be about 13%, and that the technology sector’s earnings growth could reach 20% to 25%. Policies continue to support AI development and technological innovation. As market sentiment and fundamentals improve, earnings, valuations, and positions are expected to gradually recover.

A Standard Chartered research report also shows that with the development of artificial intelligence, the valuation re-rating potential of China’s technology innovation industries is worth attention. A series of supportive policies also help improve the asset return rate of state-owned enterprises and encourage companies to increase dividends or share buybacks.