Zhang Kun, once renowned for his heavy bets on baijiu stocks, has dramatically reduced his holdings in leading liquor companies like Kweichow Moutai and turned to semiconductors and optical communications in the second quarter. This emblematic shift reflects a comprehensive and drastic change in the overall portfolio style of active mutual funds in Q2 2026.
According to a research report from China Securities, by the end of the second quarter of 2026, the allocation of active equity-focused funds to the electronics sector had risen to approximately 43%, with the communications sector accounting for about 17%. The combined allocation of nearly 60% for these two sectors marks a new high since 2015. Meanwhile, the allocation to the STAR Market within top holdings surged by 9.75 percentage points from the previous quarter to 26.42%, also a record peak. In contrast, the allocation to the food and beverage sector fell below 2%, indicating a full-scale retreat from consumer sectors like baijiu.
At the individual stock level, the market value of holdings in Zhongji Innolight (SZSE: 300308) increased by approximately 89.1 billion yuan to 161.8 billion yuan, solidifying its position as the top holding. Sunny Optical Technology (HKG: 2382) saw holdings increase by about 66.3 billion yuan, moving it to the second position. Stocks including Cambricon Technologies (SHSE: 688256), Dongshan Precision Manufacturing (SZSE: 002384), GigaDevice Semiconductor (SHSE: 603986), Naura Technology Group (SZSE: 002371), and Sanan Optoelectronics (SHSE: 600703) all received increases exceeding 30 billion yuan.
This massive portfolio migration occurred against the backdrop of a pronounced, technology-led structural rally in the A-share market during Q2. The ChiNext Index soared 36.4%, while the electronics and communications sectors each gained over 60%. Active equity-focused funds delivered an average return of 24.2%, significantly outperforming the CSI 300's 11.9% gain. The trend of capital concentration in technology is driven by performance logic, yet the concentration risk following such intense herding warrants attention. Since July, the electronics sector has already corrected by over 20%.
A Major Portfolio Reconfiguration by Zhang Kun
Zhang Kun's portfolio pivot stands as one of the most symbolic events in this round of mutual fund style rotation.
The fund manager, known for over a decade as a "baijiu believer," substantially restructured the E Fund Blue Chip Selected Fund in Q2. By the end of Q2, the fund held 968,500 shares of Kweichow Moutai (SHSE: 600519), a 47.13% reduction from the end of Q1, with its holding value as a percentage of net asset value dropping to 5.62%—a six-year low. Shareholdings in Luzhou Laojiao (SZSE: 000568), Wuliangye Yibin (SZSE: 000858), and Shanxi Xinghuacun Fen Wine Factory (SHSE: 600809) decreased by 51.76%, 70.68%, and 70.91% respectively from Q1. The combined NAV ratio for these three holdings fell to just about 10%, far below the 29% in Q1.
Concurrently, the fund made a historic first-time purchase of two tech stocks: SMIC (HKG: 0981) and Dongshan Precision Manufacturing (SZSE: 002384). The Hong Kong stock allocation was sharply reduced from 46.07% to 25.11%, and the total equity allocation dropped from 93.12% to 75%. The concentration of the top ten holdings fell to 38.95%, its lowest level on record.
In the Q2 report, Zhang characterized this adjustment as an active strategic shift rather than passive selling. He stated the fund began to be co-managed by a team in Q2, leading to structural adjustments that increased allocations to sectors like electronics, communications, utilities, transportation, and metals, while reducing allocations to food & beverage, internet, and pharmaceuticals. Regarding AI, he focused on optical communications, semiconductor equipment, upstream AI materials, and domestic computing power, which benefit from the inference era.
Notably, this transformation closely aligns with the timing of the appointments of co-managers He Yicheng and Yang Siliang to the E Fund Blue Chip Selected in May. Two other funds, E Fund Quality Select and E Fund Quality Enterprise Three-Year Holding, also appointed co-managers Peng Ke and Zhang Qi in June. Their top ten holding concentration ratios similarly dropped to record lows of 68.95% and 77.88%, respectively.
In contrast, Liu Yanchun, another prominent "liquor enthusiast," showed a more nuanced approach to baijiu in Q2. His Invesco Great Wall Growth Fund maintained a high position in Kweichow Moutai (SHSE: 600519) (still holding 870,000 shares, 9.58% of NAV) but significantly reduced holdings in Shanxi Xinghuacun Fen Wine Factory (SHSE: 600809) by 2.6 million shares, with Wuliangye Yibin (SZSE: 000858) exiting the top ten holdings.
Industry-Level Trends: Electronics and Communications Dominate
Zhang Kun's personal choices were echoed by the collective actions of nearly the entire active fund industry.
According to the China Securities report, based on changes in the market value of holdings by primary industry, active equity-focused funds aggressively added to electronics and communications in Q2. The market value of top holdings in electronics increased by approximately 631.7 billion yuan, while communications saw an increase of about 177 billion yuan. The combined scale of these additions far exceeded the net sum of all other industries' buying and selling activities.
The stocks with the largest increases in holdings were highly concentrated in the communications and electronics sectors. Zhongji Innolight (SZSE: 300308) saw its holding value rise by about 89.1 billion yuan to 161.8 billion yuan, retaining its top spot. Sunny Optical Technology (HKG: 2382) rose to second place after a 66.3 billion yuan increase. Cambricon Technologies (SHSE: 688256), Dongshan Precision Manufacturing (SZSE: 002384), GigaDevice Semiconductor (SHSE: 603986), Naura Technology Group (SZSE: 002371), and Sanan Optoelectronics (SHSE: 600703) all received increases exceeding 30 billion yuan.
This stands in stark contrast to the concentrated selling of previously core holdings like Tencent Holdings (HKG: 0700), Contemporary Amperex Technology (SZSE: 300750), Kweichow Moutai (SHSE: 600519), Alibaba Group (HKG: 9988), and Zijin Mining Group (SHSE: 601899), all of which saw reductions exceeding 10 billion yuan. The overall allocation to the food and beverage sector has plummeted from its peak of about 18%-19% in 2020-2021 to around 1.5% currently—a level last seen before 2016. The allocation to power equipment and new energy also retreated from its peak of over 16% to approximately 5.65%.
From a sector structure perspective, the TMT sector's overall allocation jumped 24.82 percentage points in a single quarter to 62.35%. The allocation to midstream manufacturing fell from 22.41% to 14.46%, the cyclical sector dropped from 19.44% to 11.70%, and allocations to consumer, pharmaceutical, and financial/real estate sectors also contracted across the board.
Market Segment and Style Shifts
Beyond industry rotation, profound structural changes also occurred at the market segment and market capitalization levels.
The report indicates that active equity funds' allocation to the STAR Market within top holdings surged by 9.75 percentage points to 26.42% in Q2, a record high. The ChiNext allocation increased by 4.54 percentage points to 30.01%. The combined allocation to these two "innovation" boards exceeded 56%, while the main board allocation further compressed to 43.47%. This closely correlates with the concentration of the tech rally on these boards and the significant number of semiconductor listings on the STAR Market.
In terms of market cap style, large-cap allocation rebounded significantly. The proportion of mid- and small-cap stocks with market capitalizations below 50 billion yuan plummeted by 15.48 percentage points to 16.7% compared to the previous quarter. In contrast, allocations across all market cap brackets from 200 billion to over 1 trillion yuan increased to varying degrees, with the 500 billion to 1 trillion and over 1 trillion brackets rising by 6.81 and 6.46 percentage points, respectively. The accelerated concentration of tech leaders into large-cap stocks is a notable feature of this herding episode.
Regarding overall positioning, the total equity allocation of active equity-focused funds recovered somewhat in Q2. Positions for ordinary equity funds, equity-biased hybrid funds, and flexible allocation funds were 90.21%, 88.61%, and 86.60%, respectively, showing slight increases from the prior quarter. However, Hong Kong stock allocations continued their downward trend, decreasing by about 7.7 percentage points from the previous quarter-end, aligning with the direction taken by top managers like Zhang Kun in significantly cutting Hong Kong exposure.
Concentration Risks: Herding Intensity Exceeds 2020-2021 Cycle
The concentration level of this tech herding episode has, from a historical perspective, surpassed any previous thematic rally.
Historical data compiled in the report shows that the peak combined allocation of active equity funds to food & beverage and pharmaceuticals during 2020 to early 2021 was about 35%. Currently, the combined allocation to just electronics and communications is nearing 60%, far exceeding that previous peak. At the individual stock level, Zhongji Innolight (SZSE: 300308) leads with a top holding value of 161.8 billion yuan, followed by Sunny Optical Technology (HKG: 2382) at 132.9 billion yuan. Their combined holding value is already close to the combined scale of consumer giants like Moutai and Wuliangye during that earlier period.
The top-performing funds by the end of Q2 were almost exclusively those heavily invested in semiconductor equipment, AI computing power, and optical communications. High-conviction funds with over 80% allocation, such as Orient AI Theme, Yinhua Integrated Circuit, and Southern Information Innovation, all posted net value growth exceeding 120% for the quarter, with year-to-date gains reaching over 114%.
However, since entering July, the previously leading electronics sector has corrected by more than 20%. A highly concentrated portfolio structure implies that if capital flows reverse, the speed of net value drawdown could be equally rapid. From a scale perspective, while the overall net asset value of active equity funds rose in Q2, their total shares continued to shrink, with some investors choosing to redeem at high levels—a divergence worth noting.
The report also points out that the holdings disclosed in fund periodic reports are static data at the quarter-end and may be subject to short-term adjustments, potentially not fully reflecting the funds' actual investment behavior.
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