On July 20, Yinhua Fund disclosed its second-quarter reports for 2026. During the period, the firm's prominent fund manager, Li Xiaoxing, implemented substantial changes to his fund holdings.

Taking the largest fund, Yinhua Small and Mid-Cap Blend A, as an example, it operated with a high equity allocation in Q2, achieving a net asset value growth rate of 90.97% during the reporting period. The portfolio saw a dramatic reshuffle, with only Suzhou Dongshan Precision Manufacturing Co.,Ltd. (002384.SZ) retained among the top ten holdings. The other nine positions were completely replaced by new entrants: Shennan Circuits Co.,Ltd. (002916.SZ), Chaozhou Three-Circle(Group)Co.,Ltd. (300408.SZ), Zhongji Innolight Co.,Ltd. (300308.SZ), Jiangsu Zhongtian Technology Co.,Ltd. (600522.SH), Hengtong Optic-Electric Co.,Ltd. (600487.SH), Eoptolink Technology Inc.,Ltd. (300502.SZ), Yuanjie Semiconductor Technology Co.,Ltd. (688498.SH), Jiangsu Etern Company Limited (600105.SH), and Jiujiang Defu Technology Co.,Limited. (301511.SZ), signifying a strong pivot towards the technology sector.

Similarly, the Q2 report for Yinhua Xinyi Fund showed its equity allocation stood at 87.10% at the end of Q2 2026, a decrease of 6.88 percentage points from 93.98% at the end of Q1. Compared to the previous quarter, five new stocks entered its top ten holdings.

Specifically, Huaqin Co.,Ltd. (603296.SH), Zijin Mining Group Company Limited (601899.SH), Shandong Hongqiao Aluminum Industry Holding Company Limited (002379.SZ), Sany Heavy Industry Co.,Ltd. (600031.SH), and Xcmg Construction Machinery Co.,Ltd. (000425.SZ) became new top holdings, while positions like Tencent Holdings Ltd (00700.HK), Alibaba Group Holding Ltd (09988.HK), and Kweichow Moutai Co.,Ltd. (600519.SH) exited the list.

Li Xiaoxing commented that the equity market saw increased divergence in the first half, with the technology sector delivering significant excess returns, and AI being the main theme of this technology "bull market."

From an industry perspective, he noted that global AI computing power investment has high certainty for this year and next, with demand not yet hitting a ceiling. However, recent market volatility due to macroeconomic factors has led to some debate over the sustainability of high-intensity AI investment beyond next year.

Li believes the growth rate of AI capital expenditure is merely an outcome. The core indicators to watch on the demand side are the iteration speed of leading large language models and their Annual Recurring Revenue (ARR) growth. He stated that a demand inflection point has not been observed yet and requires continuous monitoring.

He is currently optimistic about leading companies within the computing power supply chain that demonstrate a good match between earnings growth and valuation, as well as upstream AI inflation segments like optical fiber, MLCCs, certain upstream PCB materials, and substrates. Sectors with widening supply-demand gaps are expected to benefit from both volume and price increases.

Looking ahead to the second half of the year, Li believes overall market risk is limited. Although some sub-sectors within technology show signs of overheating, he argues that investors with moderate return expectations can still identify numerous opportunities across the market capable of delivering absolute and relative returns over the medium to long term.

He maintains that the AI narrative remains strong and can still warrant an overweight position in a portfolio, but investment opportunities in other sectors are gradually emerging and should not be entirely overlooked.

Regarding the recent rebound in the healthcare sector, Li pointed out that the innovative drug segment experienced a deep correction in the first half, with most leading companies' stock prices falling back to levels seen in April-May 2025. However, fundamentals for innovative drugs remain robust, with overseas pipeline deals and clinical data readouts continuing to exceed expectations. The decline was primarily due to shifting capital preferences and macro thematic rotations.

At current valuations, Li believes both innovative drug companies and CRO/CDMOs offer compelling value. He plans to continue focusing on high-quality leading companies with attractive stock prices, looking for opportunities to establish positions.