As the first-quarter 2026 earnings reports for A-share listed companies concluded, the portfolio adjustments of foreign institutional investors have come into full view. According to Wind data, by the end of Q1, foreign capital appeared among the top ten circulating shareholders of 1,521 A-share listed companies, with a combined shareholding of 11.54 billion shares, corresponding to a market value of approximately 195.06 billion yuan. Compared to the end of last year, both figures showed significant increases, with shareholdings rising by 4.61 billion shares and market value surging by 67.54 billion yuan, indicating a marked enhancement in international capital allocation to Chinese assets.
Institutional analysts noted that foreign capital is systematically reassessing the value of Chinese asset allocation. Behind the overall expansion, the stock selection logic and sector preferences are being restructured. A strategic shift from traditional financial blue-chips towards high-end manufacturing, domestically controllable technology, and upstream energy resources has become the defining characteristic of this rebalancing cycle.
**New Holdings Value Ranking: Resources and AI Computing Power Share the Spotlight**
According to Wind statistics, QFIIs established new positions in 685 stocks, increased holdings in 473 stocks, and reduced holdings in 336 stocks in Q1. Among the newly added positions, panel and resource sector leaders saw batch investments. BOE Technology Group ranked first among new holdings with 303 million shares, followed by TCL Technology (166 million shares), Zijin Mining Group (141 million shares), and Auroda (113 million shares).
From a market value perspective, Zijin Mining Group ranked first among new holdings. By the end of Q1, it was newly and heavily acquired by the Abu Dhabi Investment Authority (ADIA), with a holding value reaching 4.626 billion yuan. In second place was the AI computing power concept stock, TFC Optical Communication. By the end of Q1, it was newly added to the portfolios of two QFIIs—Morgan Stanley International and UBS Group—with a combined holding value of 3.709 billion yuan.
Following closely was the optical module leader, Zhongji Innolight. In Q1, it was newly added to Morgan Stanley International's portfolio, with a market value of 3.698 billion yuan, ranking third.
Notably, based on changes in holding market value, ADIA was the foreign institution that increased its A-share holdings the most in Q1, with its portfolio value surging by approximately 13.485 billion yuan to 19.524 billion yuan, more than triple the value from the end of the previous quarter. BOE Technology Group, TCL Technology, Zijin Mining Group, and Shengyi Technology were among ADIA's new additions.
**Divergent Buying Trends Among Major Foreign Institutions: Goldman Sachs Broadly Diversified, Morgan Stanley Focused on AI**
In terms of industry trends, the buying directions of major foreign institutions diverged. Goldman Sachs, through its two QFII entities, appeared among the top ten circulating shareholders of 894 A-share companies by the end of Q1, showing significant portfolio adjustments. Specifically, it established new positions in 525 stocks, increased holdings in 219, and reduced holdings in 150, with an overall portfolio value of approximately 25 billion yuan.
In terms of specific moves, Goldman Sachs increased holdings in stocks such as Hengshen New Materials, Huafang Co., Ltd., Tefa Information, and Fengyuan Co., Ltd. in Q1. Stocks with larger reductions included Pengling Co., Ltd., Sanxia New Materials, Yuyin Co., Ltd., Shanghai Hugong, Hualing Cable, and Zhejiang Shibao.
Regarding major holdings, Goldman Sachs held over 20 stocks with a market value exceeding 100 million yuan each. OmniVision Technologies, Xingye Bank Silver & Tin, and Yongding Co., Ltd. were its top three holdings. OmniVision Technologies remained its largest holding, with 8.1245 million shares held at the period-end, ranking seventh among the company's top ten circulating shareholders, corresponding to a circulating market value of about 772 million yuan.
In contrast to Goldman Sachs's broad diversification, Morgan Stanley focused more narrowly on the AI computing power industry chain. Specifically, Morgan Stanley entered the top ten circulating shareholders of 316 listed companies in Q1, including 249 new positions, 34 increased holdings, and 33 reduced holdings, with a total portfolio value of approximately 17.190 billion yuan.
Morgan Stanley held 16 stocks with a market value exceeding 100 million yuan each. Its top three holdings were Zhongji Innolight, TFC Optical Communication, and China XD Electric. Zhongji Innolight was a new addition in Q1, with 6.4949 million shares held, placing it among the company's top ten circulating shareholders with a circulating market value of about 3.698 billion yuan. TFC Optical Communication was also a new addition, ranking as its second-largest holding.
Recently, Morgan Stanley issued a research report maintaining a bullish outlook on the optical communication sector amid the AI frenzy. The firm believes that against the backdrop of continuous AI computing power upgrades, the industrial cycle for optical communication is far from over. The next phase of growth will belong to companies that truly grasp supply-demand dynamics, technological advancements, and profit certainty.
Additionally, UBS Group's top three holdings by market value in Q1 were Songfa Co., Ltd., Yuanjie Technology, and TFC Optical Communication. Songfa Co., Ltd. was its largest holding, with the latest holding at 15.7585 million shares, an increase of 1.9156 million shares from the previous period, ranking as the company's second-largest circulating shareholder with a circulating market value of approximately 1.768 billion yuan.
On the reduction side, QFIIs cut their holdings in China XD Electric the most in Q1, by 51.7992 million shares. This was followed by reductions in Leike Defense, Zhongchao Holdings, and Hengtong Co., Ltd., with decreases of 43.2323 million shares, 41.8535 million shares, and 36.4861 million shares, respectively. Furthermore, Hongfa Co., Ltd. and Galaxy Electronics also saw reductions exceeding 20 million shares each.
**Market Style Shift, Foreign Bullishness Forms Consensus**
In terms of market performance, the A-share market overall showed a pattern of rising then falling, with volatile differentiation in Q1 2026. During this period, the Shanghai Composite Index once approached the 4200-point mark but ultimately ended the quarter down 1.94%, breaking a streak of three consecutive quarterly gains. The Shenzhen Component Index fell 0.35%, marking two consecutive quarterly declines, while the ChiNext Index fell 0.57%, also declining for two consecutive quarters.
From the perspective of Shenwan secondary industries, oilfield services engineering led gains in Q1, surging 34.25% during the reporting period, followed by the precious metals and glass/fiberglass industry indices, which also rose over 20%.
Recently, as the market warmed up, trading volume continued to expand, with A-share turnover exceeding 3 trillion yuan for multiple consecutive days. The market's main theme revolved deeply around the AI industry chain. As of the week of May 17th, the communications sector surged 8%, with optical module leaders continuously hitting new highs, followed by gains in computing hardware segments like CPO, high-speed optical chips, PCBs, and memory chips.
Market participants believe that the A-share market has completed a style shift amidst repeated surges and adjustments, with resilience notably evident in the technology and energy directions. Last week, the market consolidated under dual pressures from external volatility and profit-taking. However, trading remained consistently active, and positive news for the technology main theme (computing power network construction) continued to emerge, indicating that the medium-term revaluation logic remains intact.
Regarding the market's future performance, several foreign institutions have recently expressed optimism. "We have raised our 2026 year-on-year profit growth forecast for all A-shares from the previous 8% to 11%," said Meng Lei, China equity strategist at UBS Securities. He stated that the momentum for further upside in the A-share market in the next phase will be driven by profit growth, with multiple key indicators pointing to a recovery in A-share earnings.
Simultaneously, the consensus expectation for the 2026 year-on-year profit growth rate of the CSI 300 Index has been continuously revised upward from 10.2% at the end of last year to the recent 15.9%, indicating a bottom-up improvement in profit expectations.
Wang Ying, Chief China Strategist at Morgan Stanley, anticipates a moderate upward trend in the Chinese market in Q2 2027, with core drivers being corporate profit recovery, enhanced dominance in upstream supply chains, and RMB appreciation. The firm clearly favors A-shares over offshore markets and recommends thematic investing over passive allocation.
Wang Ying believes that accelerated capital expenditure in AI and energy will boost exports, the RMB is expected to appreciate against the USD, price competition among internet platforms has peaked, Chinese corporate profit prospects will moderately improve, their position in the global high-end supply chain will strengthen, and valuations will undergo marginal re-rating.
Furthermore, analysis from a CICC research report noted that Middle Eastern capital has accelerated its deployment in China in recent years, with a clearly evolving investment logic. Beyond traditional resource plays like Baofeng Energy, its focus has shifted towards three main directions: first, new energy leaders in solar and lithium batteries, aligning with the Middle East's green transition needs; second, high-end manufacturing, leveraging China's hard power to share in dividends and address their own equipment and technology pain points; and third, AI infrastructure, applications, and hard technology, resonating with their global technology allocation strategy.
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