Last week, volatility in the A-share market intensified, continuing a trend of shrinking volume and pullback. Observing the performance of public fund-of-funds, most FOF categories saw more declines than gains.

However, a few products posted significant gains against the trend, and based on their previously disclosed heavy holdings, it appears these funds made notable portfolio adjustments. During the trading week of August 17 to August 23, the A-share market saw clear fluctuations, with the tech sector pulling back sharply after an earlier recovery. This weighed on the weekly performance of public FOFs, where the win rate for equity-focused FOFs was low. Among stock FOFs, only Guotai Industry Rotation and ICBC Rui Zhi Jin Qu One-Year posted positive returns. Of 507 hybrid FOFs, 58 recorded gains, while only 2 of 95 pension-target FOFs finished the week in positive territory, based on initial fund counts.

The primary driver of the underwhelming performance was the decline in equity assets. Commenting on last week's A-share market, Minsheng Jiayin Fund noted that the current adjustment is more likely an emotional release driven by higher overseas yields. Additionally, the U.S. Treasury's announcement of a short-term borrowing and long-term buying operation, aimed at lowering long-end yields, has boosted the gold and silver markets, easing external pressures somewhat. Other analysts attribute the downturn to a style rotation in the market. Long Jiangwei, manager of Hangsheng Qianhai High-End Manufacturing Mixed Fund, said that from the market structure, a clear style shift is underway, with capital flowing out of high-volatility growth sectors and into defensive plays like banks and coal, leading to greater sector divergence. Historically, selling by trading-oriented funds can quickly release risk and accelerate turnover. While a grand narrative may face persistent disruptions, it does not alter the underlying direction of the tide. Over the long term, the AI industry remains in an investment expansion phase, with model vendors' business metrics like ARR still growing, and the logic of AI forming a profitable business model has not been disproven.

Notably, some funds surged against the trend last week, and their previously disclosed holdings point to clear rebalancing activity. Take Guotai Industry Rotation, for example, which posted the best performance among public FOFs last week, with a single-week return of 10.79%. This FOF held Guotai Gold Stock ETF heavily at the end of the second quarter, and that ETF rose more than 13% over the past week. In terms of the FOF's net value allocation, the Gold Stock ETF accounted for only 0.15% at the end of the second quarter, the lowest allocation among its top ten heavy holdings. Meanwhile, the FOF had a relatively high allocation to rare-earth ETFs at the end of the second quarter, but those fell sharply last week. It is likely that the fund increased its position in Guotai Gold Stock ETF, especially since few other leading sectors posted gains exceeding 10% last week, making a move toward gold highly probable.

Of course, industry sentiment toward tech investment remains optimistic. At least from an institutional research perspective, the tech sector continues to draw strong attention. According to statistics from Gongmu PaiPaiWang, public fund research last week focused on three major industries: electronics, machinery and equipment, and optical components. Specifically, public funds showed heightened enthusiasm for the electronics sector, researching 20 stocks in that industry with a total of 276 research visits, making it the most researched sector by public funds. Hangsheng Qianhai Fund believes that in the short term, the market will refocus on capital expenditure narratives and model breakthroughs, and the tech sector still has room for recovery. Over the long term, the AI industry remains in an investment expansion phase with no signs of slowing. While indices have pulled back recently, there is still considerable upside potential for future recovery. In terms of allocation, the tech sector remains a mainstream direction, and the medium-to-long-term prospects for related companies are still broad.

Looking ahead, the A-share market is expected to continue showing structural rotation, with a seesaw effect between growth and dividend sectors likely to persist.