The first-quarter report for Ruiyuan Equilibrium Value Three-Year Holding, managed by Ruiyuan Fund's Zhao Feng, has been disclosed. Regarding performance, as of the end of the reporting period, the net asset value per share for the Class A fund was 1.6438 yuan. During the reporting period, the net asset value growth rate for this class was -3.67%, while the benchmark yield was -3.41%. The net asset value per share for the Class C fund was 1.6140 yuan, with a net asset value growth rate of -3.74% against the same benchmark yield of -3.41%.
The fund's top ten holdings, in order, were: Contemporary Amperex Technology Co.,Ltd. (300750.SZ), TENCENT (00700), Midea Group Co.,Ltd. (000333.SZ), Zhejiang Weiming Environment Protection Co.,Ltd. (603568.SH), Luxshare Precision Industry Co.,Ltd. (002475.SZ), CPIC (02601), ZTO EXPRESS-W (02057), Tcl Technology Group Corporation (000100.SZ), CHINA RES MIXC (01209), and Gree Electric Appliances,Inc.Of Zhuhai (000651.SZ). Among these, ZTO EXPRESS-W and Tcl Technology Group Corporation entered the top ten holdings for the first time.
Compared to the end of 2025, Zhao Feng increased his holding in ZTO EXPRESS-W by 600,000 shares during the first quarter of 2026. After initiating a position in Tcl Technology Group Corporation in the second half of 2025, he added another 43 million shares in Q1 2026. Furthermore, Zhao Feng increased holdings in TENCENT, Midea Group Co.,Ltd., and Luxshare Precision Industry Co.,Ltd., while reducing holdings in Contemporary Amperex Technology Co.,Ltd., Zhejiang Weiming Environment Protection Co.,Ltd., and CPIC to varying degrees.
Analyzing the specific portfolio adjustments in the quarterly report, Zhao Feng stated the main sectors reduced were insurance, media, and local services. The main sectors increased were display panels, white goods (major home appliances), and pharmaceuticals. Following significant gains last year, the price-to-book (PB) ratios of major insurance companies have rebounded above 1x. Furthermore, the equity holdings of insurance companies have risen noticeably, leading to substantially increased volatility in quarterly financial profits and making the risk-reward profile significantly less attractive. While the intensity of competition for market share in the local services sector has decreased somewhat, there are no signs of it ending. Accompanying market share shifts, the long-term profit potential for industry participants may trend downward, necessitating renewed observation and evaluation.
Zhao Feng believes that after years of intense competition, the global display panel industry has seen a significant increase in concentration. The top two Chinese companies now hold close to a 60% market share, while the top four exceed 70%. Additionally, new supply has essentially stalled. Coupled with the trend towards larger TV screens, supply and demand dynamics are continuously improving. From the perspective of free cash flow levels of TFT-LCD assets, valuations have reached very attractive levels.
Furthermore, Zhao Feng indicated that the competitive landscape in the white goods industry has remained relatively stable, with excellent profitability among industry players. Although domestic demand growth has slowed and there is a risk of subsidies being pulled forward, overseas own-brand business is in the early stages of rapid growth and could deliver fast revenue growth for many years to come. Combined with low valuation levels and attractive dividend and buyback yields, they represent sound long-term holdings.
Geopolitical tensions stemming from the US-Iran conflict and resulting oil price volatility in the first quarter put significant pressure on the Hong Kong market. External shocks are risks that are almost impossible to predict during the investment process. Fund managers can only attempt to minimize the impact on net asset value from two aspects. First, by maintaining a portfolio with relatively low valuations, providing a margin of safety. When external risks emerge, low valuations can offer some protection, especially in markets dominated by local capital; even during sudden risks, the flight to safety can benefit lower-valued assets. Second, by diligently assessing the long-term, certain impacts of unexpected events and adjusting the portfolio accordingly. Market short-term reactions are swift, with event impacts often immediately reflected in the price movements of different sectors. However, these reactions invariably mix short-term and long-term, real and narrative-driven influences. Markets typically overreact to short-term and narrative factors and underreact to long-term and fundamental factors. Therefore, conducting thorough analysis post-event to distinguish between these factors can benefit future portfolio returns.
Following the US-Iran conflict, the overall view was that the resilience demonstrated by China's economic fundamentals would increase its attractiveness to global capital. Future global energy supply will become more diversified in terms of sources and geography, and the advantages of a complete industrial chain will become more pronounced. China is in a very favorable position regarding these aspects, and a long-term optimistic view on Chinese equity markets is maintained. After adjustments in the first quarter, valuations for some assets have declined, increasing the attractiveness of their potential long-term returns. After short-term event-driven shocks, the equity market is expected to revert to long-term fundamental considerations.
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