A-shares surged with both volume and price momentum, propelling the Shanghai Composite Index to fresh annual highs before entering a consolidation phase. This bullish sentiment coincides with emerging divisions among private equity firms regarding short-term market direction, creating a striking contrast between accelerating capital inflows and institutional disagreements.

Fresh capital is rapidly converging on the market. Recent positioning data reveals domestic equity-focused private funds boosted their average allocation to 77.36% by July 4, marking a significant 2.07 percentage point weekly increase—an unusually sharp historical rise. This positions the sector near its yearly peak while establishing the second-highest level recorded this year. More notably, top-tier private funds managing over 10 billion yuan pushed their allocations to 83.26%, a robust 3.3 percentage point weekly jump that represents their highest exposure in 93 weeks. "This aggressive positioning, especially among large institutions, demonstrates unwavering confidence in capital markets' long-term trajectory," remarked Li Chunyu, FOF manager at Rongzhi Investment, suggesting structural opportunities persist as institutions capitalize on relatively low valuations.

Parallel evidence emerges from margin trading figures, where A-share financing balances held firmly above 1.8 trillion yuan for over a month since June 9, reaching 1.87 trillion by July 14—the highest since early April. He Jinlong, CEO of Youmeili Investment, attributes this positioning surge to dual forces: expanding household savings and declining interest rates. "With CSI 300's dividend yield surpassing long-term government bonds, equities now offer compelling allocation appeal," he observed, noting additional policy-driven inflows from insurance and pension funds.

Recent volatility in banking stocks during this capital influx has triggered divergent outlooks. Optimists like Rongzhi Investment's Xia Fengguang maintain robust foundations exist across policy support, external conditions, currency stability, and consumption patterns. "This presents exceptional risk-reward dynamics," he asserted, advocating high allocations to high-ROE assets. Cheese Fund's Pan Jun echoed cautious optimism, citing three inflow drivers: resurgent market sentiment pulling retail investors and funds into equities, falling rates channeling wealth products toward high-dividend stocks, and improving external conditions luring foreign capital back.

Contrasting perspectives urge vigilance. He Jinlong warned that structural shifts are heightening vulnerabilities: "Indices hover near upper-middle valuation percentiles while banking stocks churn violently. Extreme rotations between dividend plays and small-caps have congested certain sectors." He cautioned that sustained momentum requires persistent volume support, flagging potential "false breakouts" if turnover dwindles amid lingering external uncertainties. Xia Fengguang added that lasting market advancement ultimately hinges on broad-based earnings recovery and effective policy transmission to corporate fundamentals.

Navigating these crosscurrents, private funds are crafting balanced portfolios through differentiated positioning and sector bets, with technology innovation emerging as a consensus long-term anchor. While Xia Fengguang champions maximum exposure given favorable risk-reward metrics, He Jinlong proposes flexible barbell strategies: "Maintain medium allocations as baseline, dynamically balancing offensive tech growth with defensive dividend stability." Hu Yao of 10 billion yuan fund Yongan Guofu emphasized contrarian tactics: "We'll strategically boost A-share and H-share positions during pullbacks."

Industry allocation reveals deepening focus on secular trends. Hu Yao targets six durable opportunities: new consumer demands, commercialized biopharma innovations, globally integrated AI applications, stablecoin-driven fintech ecosystems, insurance-fueled bank stock demand, and broker-insurance cyclical rebounds. "These multi-year themes will likely drive future market development," he projected. Pan Jun meanwhile eyes policy-driven plays: domestic substitution aligned with new productivity goals and supply-side reforms in anti-involution sectors. He Jinlong supplements this with recovery opportunities: "Beyond the tech-dividend barbell, dynamically target undervalued industries poised for cyclical rebounds."

Trading discipline remains paramount amid fluctuating conditions. He Jinlong noted the market's "ascending trajectory through persistent divergence," advising investors to sidestep emotional whipsaws. "Avoid chasing rallies or panic selling during event-driven volatility," he cautioned, underscoring the need for measured positioning as structural shifts unfold.