As mutual funds progressively disclose their 2025 annual reports, the hidden heavyweight stock positions of these funds are coming to light. Notably, ST-category stocks are frequently appearing in both the primary and secondary heavyweight portfolios of funds. Particularly in the latest annual report disclosures detailing holdings beyond the top ten largest positions, stocks such as ST Renfu, *ST Chengchang, and *ST Songfa have garnered significant institutional attention.
Furthermore, several funds have allocated to multiple ST stocks. For instance, funds including Invesco Great Wall Quantitative Select and China Europe Quantitative Drive Mixed held several ST stocks in their portfolios at the end of last year. Analysis indicates that if a fund's contract does not contain specific restrictions, ST stocks are not off-limits. Some investment strategies focus on identifying turnaround opportunities in distressed companies, and the potential for certain ST stocks to have their special treatment status removed aligns with this approach.
The frequent appearance of ST companies among hidden heavyweight holdings highlights that some funds hold multiple such stocks. With the disclosure of the 2025 mutual fund annual reports, the complete portfolio holdings as of the period-end are being revealed. Beyond the previously announced top ten holdings, the detailed list of other stock investments published in the annual reports is attracting considerable interest. As a special category, ST stocks have become a key allocation target for many funds.
As of March 31, 2026, among the disclosed 2025 fund annual reports, multiple stocks like ST Renfu, *ST Chengchang, and *ST Songfa have been closely watched by institutions. Taking ordinary equity funds as an example, six funds held ST Renfu at the period-end. Among partial equity hybrid funds, three held the stock, while eleven flexible allocation funds included it in their portfolios.
In terms of the market value of holdings at the quarter's end, Harvest Emerging Industries Stock held ST Renfu with a value reaching 223 million yuan, accounting for 4.85% of its net asset value. Notably, this stock was also the fund's sixth-largest holding. Similarly, another Harvest Fund product, Harvest Taihe Mixed, also held ST Renfu, with an end-of-period holding value of 119 million yuan.
ST Renfu is a leading domestic enterprise in the anesthesia drug sector. However, it was penalized due to issues including failure to promptly disclose non-operational fund usage and related-party transactions. Since December 16 of last year, its A-share abbreviation was changed to ST Renfu.
Certainly, the number of funds holding this stock is substantial, primarily concentrated in thematic funds focused on biopharmaceuticals or technology industries. Based on data allowing quarter-on-quarter holding comparisons, products under many asset management companies have implemented reduction operations. These prominent companies themselves are well-known industry leaders with high recognition.
Additionally, some relatively lesser-known stocks have also attracted institutional attention, though their individual performance has not been ideal. Taking *ST Jiyou as an example, several funds under Invesco Great Wall participated in allocations, including Invesco Great Wall Quantitative Small Cap, Invesco Great Wall Quantitative Select, and Invesco Great Wall Quantitative Dynamic.
Within the industry, asset allocation is conducted according to contractual stipulations, which aligns with certain investment strategies. Regarding whether ST-category stocks can enter mutual fund portfolios, or even become heavyweight holdings, inquiries made on March 31 revealed that there are currently no explicit regulations universally prohibiting it, though some fund contracts do forbid such allocations.
A mutual fund professional based in South China indicated that current fund investment management rules do not explicitly prohibit investment in ST stocks. Therefore, unless a contract specifically restricts investment in risk-warning category stocks, such allocations are generally permissible in principle.
Internal reviews for this type of stock are certainly stringent. Provided the company's fundamental quality is sound and it even shows signs of a performance turnaround from distress, such stocks might be included in the stock pool for fund managers pursuing reversal strategies. It is understood that, barring specific restrictions, it is permissible for such a stock to be configured even as one of the top ten heavyweight holdings.
Naturally, some ST stocks that become heavy holdings might encounter unforeseen events during the holding period, leading to penalties and the imposition of risk warnings. For such stocks, respondents noted that position reductions or even complete liquidation would be considered based on the circumstances. If corporate governance remains intact, the possibility of further increasing the position later cannot be ruled out.
Based on the disclosed holdings, the fund annual reports only allow comparison with the semi-annual report data. By comparison, many ST stocks are newly acquired holdings, with some funds even holding multiple ST stocks. For example, China Europe Quantitative Drive Mixed held ST Derun, ST Dahua, and ST Cuihua at the end of last year, none of which were held in the middle of the year.
Conversely, some funds, while holding multiple ST stocks, reduced their positions in certain holdings during the fourth quarter of last year. For instance, Penghua Advantage Enterprise held ST Baling and ST Renfu at the end of last year, but the share quantity of the latter was significantly reduced compared to mid-year. A similar situation occurred with BOC Smart Theme Configuration's holding of *ST Songfa, which was reduced to just 4,300 shares by year-end, representing an almost complete liquidation compared to mid-year holdings.
Analysis points out that although mutual funds can invest in ST stocks, many such stocks are highly prone to liquidity crises. Allocations with significant weightings can impact the overall return of the portfolio. In practice, beyond strengthening risk control constraints, it is generally advisable to avoid heavy allocations or significant positions in this type of asset.