Tech-heavy mutual funds reeled in July as crowded AI and semiconductor bets reversed

Active equity mutual funds that shifted heavily into technology in the second quarter came under sharp pressure during July’s sell-off in A-share tech stocks. According to CITIC Securities estimates cited in the report, active public funds’ allocation to the electronics sector reached a record 42.64% by the end of the second quarter. Wind data showed that 67 active equity funds sharply raised their TMT exposure, with average weighting climbing from 6.75% in the first quarter to 54.99% by the end of the second. The reversal hit funds that rotated out of consumer, liquor, healthcare, dividend and other traditional holdings and into AI, semiconductors and computing-power names near the June highs. Funds managed by well-known stock pickers including Zhang Kun, Liu Yanchun, Ke Haidong and Zhu Shaoxing were cited as examples of the broader repositioning. In July, the ChiNext Index fell 25.29%, the STAR 50 Index dropped 28.06%, and the STAR Composite Index lost more than 30% by July 30. The report also highlighted newly launched funds that built positions during the June peak and then saw net asset values slide below CNY 0.6. It cited Guotai Haitong New Energy Ruixuan Mixed Initiated A and Rongtong New Materials A as examples. The article was originally published by the Economic Observer, written by Hong Xiaotang and Zhang Pengrui.