Orient Securities has released a research report indicating that fund holdings in the retail and beauty & personal care sectors have fallen to their lowest levels since 2024. The primary reasons cited are a market shift towards high-growth sectors, intensified industry competition, and uncertainties related to geopolitical factors. The concentration of holdings decreased compared to the previous quarter, with the total number of shares held by funds in most companies declining in Q1. The brokerage suggests focusing on leading companies in the export supply chain and those in the domestic demand sector with clear operational improvement logic or industries showing gradual recovery in business conditions. Key viewpoints from Orient Securities are as follows:

Fund holdings in the retail and beauty sectors have dropped to lows since 2024. 1) In Q1 2026, the actual allocation ratio for the retail sector was 0.3%, down 0.43 percentage points year-on-year and 0.16 percentage points quarter-on-quarter. The overweight ratio was -0.59%, down 0.24 percentage points year-on-year and 0.02 percentage points quarter-on-quarter. Both actual and overweight allocations are at their lowest points since Q1 2024 (with the overweight ratio only slightly better than Q3 2024). 2) For the beauty & personal care sector in Q1 2026, the actual allocation ratio was 0.12%, down 0.2 percentage points year-on-year and 0.02 percentage points quarter-on-quarter. The overweight ratio was -0.1%, down 0.07 percentage points year-on-year and largely flat quarter-on-quarter. Both actual and overweight allocations are near their lowest levels since Q1 2024. 3) The report attributes the decline in holdings primarily to: ① Disruptions in consumption recovery expectations coupled with a market rotation into high-growth sectors; ② Increasingly fierce industry competition, particularly evident in the fading channel红利 for cosmetics and accelerated certification approvals for medical aesthetics; ③ Increased uncertainty in the fundamental outlook for external demand due to factors such as geopolitical conflicts.

The concentration of holdings declined quarter-on-quarter, with the total number of shares held by funds decreasing for most companies in Q1. 1) In Q1 2026, the concentration ratios (CR3/CR5/CR10) for top holdings in the retail sector were 74%, 83.1%, and 93.8% respectively. For the beauty & personal care sector, they were 50%, 70.5%, and 95.2% respectively. Both sectors exhibited overall high concentration but showed a slight sequential decline. 2) Ranked by the number of holding funds in Q1, Jinbo Bio, Maogeping, Anker Innovations, China Small Commodities City, and Sumec Corporation were among the leaders. Ranked by the total number of shares held, Yonghui Superstores, Agricultural Development Company of China, China Small Commodities City, Maogeping, and Ruoyuchen were at the forefront. 3) In Q1, the number of holding funds, total shares held by funds, and the percentage of shares held relative to the free float decreased for most companies sequentially. Regarding the number of holding funds, Sumec Corporation, Anker Innovations, and Proya saw the largest quarter-on-quarter increases. For total shares held by funds, Yonghui Superstores, Maogeping, and Tianhong Holdings experienced the most significant sequential increases. Regarding the percentage of free float held, OneNetOne创, Ugreen Group, and Yonghui Superstores showed the largest quarter-on-quarter increases.

The export supply chain demonstrates resilience, while structural opportunities are identified within domestic demand. 1) Export supply chain direction: Tax audit matters are expected to drive improvements on the supply side. A year-on-year decrease in tariff costs in Q2 is anticipated to help restore profit margins. Furthermore, some leading companies have clear product innovation cycles (e.g., Anker Innovations/Huabao New Energy's balcony photovoltaic storage, Anker Innovations' UV printing, Ugreen Group's NAS products), which will contribute new performance growth. Some companies are expected to reach an inflection point in their performance after resolving issues such as inventory. 2) Domestic demand direction: Companies that have undergone organizational restructuring, product portfolio optimization, and channel efficiency enhancements are expected to see improvements in their fundamental operations. 3) Attention should also be paid to new directions combining consumption and technology.

Related targets: Export chain/cross-border e-commerce direction: Anker Innovations (300866.SZ, Not Rated), China Small Commodities City (600415.SH, Not Rated), Ugreen Group (301606.SZ, Buy), Focus Technology (002315.SZ, Buy). Domestic demand direction: Kidswant (301078.SZ, Buy), East Buy (01797, Buy), Maogeping (01318, Outperform). Consumption + technology direction: Conant Optical (02276, Buy), Sumec Corporation (600710.SH, Not Rated).

Risk warnings: Weaker-than-expected consumption recovery, intensifying industry competition, risks associated with exchange rate and shipping cost fluctuations.