With fewer than 10 trading days left in 2025, the competition for top rankings among mutual funds is less intense than in previous years, as Yongying Technology Intelligent Selection has already pulled far ahead of its rivals. However, over a two-year period, the performance gap among funds is narrower, with four active equity funds achieving triple-digit returns this year. Notably, two foreign-funded products ranked in the top 10, delivering gains of 184.12% and 178.58%, respectively.
These funds—Morgan Stanley Digital Economy (017102) and Manulife Growth (162201)—have likely benefited from exposure to Nvidia’s AI computing supply chain, as indicated in their Q3 reports. Among foreign fund managers, Zhou Wenqun of Fidelity Fund stands out due to her prior experience as a sell-side strategist. Her Fidelity Heritage 6-Month Stock Fund has posted a net value growth exceeding 50% over two years.
Foreign fund managers remain overwhelmingly bullish on Chinese equities for 2026. At a recent institutional investor forum, Morgan Stanley’s Li Shengyao noted that A-shares are still in the early stages of an upcycle, with industrial profits just beginning to recover. Valuations, at 14x P/E, remain below developed markets (22x), suggesting room for upward revision.
Du Meng, Deputy General Manager and CIO of Morgan Asset Management China, emphasized that while AI-led sectors have outperformed, traditional industries with stable demand growth can also deliver strong returns.
**Foreign Funds Lead in AI Computing** Among foreign players, those converted from Sino-foreign joint ventures—such as Morgan Stanley, Manulife, and JPMorgan—hold an edge in active equity products due to their local expertise. For instance, Morgan Stanley Digital Economy, last year’s top performer, has gained ~69% YTD in 2025, nearly matching its 2024 return. Its top holdings, including Luxshare Precision and Zhongji Innolight, have doubled this year, with AI computing as the focal theme.
Similarly, Manulife Growth, a 22-year-old fund, has concentrated on AI computing, overlapping with Morgan Stanley’s picks in stocks like Zhongji Innolight and Luxshare.
**New Entrants: Spotlight on Zhou Wenqun** Among newer foreign entrants like Fidelity and Schroders, Zhou Wenqun has shone. Her Fidelity Heritage fund, heavily weighted in Hong Kong stocks (e.g., Ubtech, Smoore), has returned 51% over two years. Another fund under her management, Fidelity Dividend优选, blends high-dividend stocks with growth plays like Tencent and MGM China.
**2026 Outlook: Bullish with Caution** Foreign funds broadly expect the 2026 bull run to continue, with targets ranging from 4500 to 5000 points. Neuberger Berman highlights three key themes: commercialization validation, profit recovery, and structural opportunities in firms with moats.
Morgan’s Li Dehui favors cyclical sectors (e.g., metals) and tech (AI applications, computing power). Another unnamed manager noted rapid sector rotations in 2025 (e.g., solid-state batteries, commercial space) may persist, with deeper "overseas mapping" opportunities in 2026, such as firms linked to Nvidia or AMD.
Li Bo of Morgan Asset Management advocates a GARP (Growth at a Reasonable Price) strategy, targeting sectors like lithium batteries (post-capacity crunch), consumer electronics (AI-driven), and globally competitive Chinese manufacturers.
Investors are advised to focus on high-conviction themes while managing volatility risks.
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