Northbound funds in the first quarter of the heavy positions in the industry include power equipment, electronics, banking, food and beverage, and biomedicine

Text: "Caijing" reporter Zhang Jianfeng and special writer Kang Guoliang

Editor|Yang Xiuhong

As the main force of foreign capital, the position dynamics of northbound funds (Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect) have always attracted market attention.

On April 8, 2025, the Shanghai and Shenzhen Stock Exchanges disclosed the position data of northbound funds (Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect) in the first quarter of 2025. This is the first time that the quarterly rebalancing path of foreign capital has been fully presented since the frequency of northbound fund information disclosure was adjusted to quarterly announcement in August 2024.

Wind data shows that as of the end of the first quarter, northbound funds held a total of 3,393 stocks, with a total of 119.805 billion shares and a market value of 2.24 trillion yuan. Compared with the end of the fourth quarter of 2024, the market value of northbound funds increased by about 28.6 billion yuan.

During the same period, the top three industries with the highest market value of northbound funds were power equipment, electronics, and banking, all exceeding 220 billion yuan.

From the perspective of the position adjustment path of subdivided industries (Shenwan secondary industry classification, the same below), the real industry has become the focus of northbound capital holdings in the first quarter of 2025.

According to Wind statistics, in the first quarter of 2025, the total amount of purchases will be about 174.6 billion yuan, the total amount of sales will be about 160.8 billion yuan, and the total amount of holdings (net purchases, the same below) will be about 13.8 billion yuan.

During the same period, among the subdivided industries, northbound funds increased their holdings in 62 industries, 16 industries increased their holdings by more than 1 billion yuan, and the top 10 industries increased their holdings by more than 2.5 billion yuan. Semiconductors, passenger cars, and batteries ranked the top three with an increase of 16.9 billion yuan, 10.5 billion yuan, and 7.2 billion yuan respectively.

Judging from the above-mentioned increase in industries, the real economy was more favored by foreign capital in the first quarter. Among the top 10 industries in which northbound funds will increase their holdings in 2024, four sub-sectors will come from finance. In the first quarter of 2025, among the top 10 industries in which northbound funds increase their holdings, only joint-stock banks in the financial industry are shortlisted, and the rest belong to the real economy industry.

"Previously, foreign investors preferred industries with high dividend yields, so the financial industry was the main target of their positions." An investment banker told Caijing that with the launch of DeepSeek and the revaluation of China's assets, AI-related entities may be more favored by foreign investors.

Performance growth is the main feature of foreign capital's heavy positions and increased holdings in companies and industries in the first quarter. Wind data shows that as of April 9, 2025, more than 600 of the A-share companies with foreign holdings in the first quarter have released their 2024 report cards, of which more than eighty percent of the companies have achieved profitability and more than half of the companies have achieved net profit growth.

After the tariff storm disturbance, which industries are foreign investors optimistic about? "Caijing" combed and found that core assets such as artificial intelligence, consumer sectors and telecommunications utilities are favored by foreign investors.

Heavy power equipment

From the perspective of the industry, Wind data shows that as of March 31, 2025, the top five industries with the highest market value of northbound capital holdings in Shenwan's first-class industries are power equipment, electronics, banking, food and beverage, and biomedicine, with 273.048 billion yuan, 230.048 billion yuan, 227.572 billion yuan, 216.915 billion yuan, and 149.139 billion yuan respectively.

Compared with the top five industries in terms of market value of northbound funds held by northbound funds at the end of the fourth quarter of 2024, in the first quarter of 2025, biomedicine will replace non-bank finance, rising from sixth to fifth, and the ranking of the electronics industry will also improve.

The

industry with the largest market value of northbound capital holdings is the power equipment industry, which includes sub-sectors such as batteries and photovoltaic equipment.

In the first quarter of 2025, in the power equipment industry, there will be about 29 power equipment companies with a market value of more than 1 billion yuan held by northbound funds, and 6 companies will hold a market value of more than 6 billion yuan. Among them, CATL (300750. SZ), NARI (600406. SH), Sieyuan Electric (002028. SZ) held market capitalizations of 141.2 billion yuan, 24.7 billion yuan, and 12 billion yuan respectively, ranking among the top three.

Compared with the end of the fourth quarter of 2024, the position of northbound funds in the electronics industry has increased significantly, with the market value of the position increasing by 21.189 billion yuan, and the industry's ranking in all industries held by northbound funds has also risen from fourth to second.

The electronics industry is composed of sub-industries such as semiconductors and components. In the first quarter, there were about 11 companies with a market value of more than 5 billion yuan held by northbound funds. Among them, Weir shares (603501. SH), NAURA (002371. SZ), Lixun Precision (002475. SZ) ranked the top three, with a market value of 20.3 billion yuan, 19.8 billion yuan, and 18.7 billion yuan respectively.

Banks are one of the industries with long-term heavy positions in northbound funds. During the same period, there were 26 banks with a market value of more than 1 billion yuan and six banks with a market value of more than 10 billion yuan. Among them, China Merchants Bank (600036. SH), Agricultural Bank of China (601288. SH), Industrial Bank (601166. SH) in the top three.

UBS's research team believes that as a stable high-dividend dividend stock, the banking sector as a whole remains attractive in a low interest rate environment.

From the perspective of the increase in northbound funds, 62 industries in Shenwan's secondary industries will be increased by foreign investors in the first quarter of 2025, accounting for about 48%; The top 10 industries with increased holdings all exceeded 2.5 billion yuan.

Semiconductors, passenger cars, batteries, auto parts, and liquor were the top five industries in which foreign investors increased their positions in the first quarter, and the amount of increased holdings exceeded 5 billion yuan.

In the first quarter, the semiconductor sector in the electronics subdivision industry received an increase of 16.9 billion yuan from northbound funds. Among them, 26 semiconductor companies have been increased by more than 100 million yuan. North Huachuang, Cambrian-U (688256.SH), China Micro Corporation (688012. SH) ranked among the top three in the industry, with about 6.6 billion yuan, 3.5 billion yuan and 2.2 billion yuan respectively.

According to the analysis of brokers, in the long run, with the localization demand for semiconductor core technology highlighted, the localization rate of domestic industrial chain enterprises is strong, which brings more opportunities to domestic semiconductor enterprises, and the market potential brought by the introduction of localized equipment, materials and parts is worth paying attention to.

As the main force in the power equipment industry, the battery industry has also been increased by foreign capital. In the first quarter, 29 of the 59 battery companies held by northbound funds were increased, accounting for nearly half. Among them, 8 companies have increased their holdings by more than 100 million yuan.

The performance of the holdings has increased

The general growth of performance is the commonality of foreign investors who have heavy positions and increased their holdings in the first quarter.

The performance of the electronics industry, which is heavily funded by northbound, continues to grow. Wind data shows that in the first three quarters of 2024, the total operating income of the electronics industry increased by 18% year-on-year to 2.48 trillion yuan, and the net profit attributable to the parent company increased by 32% year-on-year to 106.7 billion yuan.

In the first quarter, seven of the 11 electronics industry companies with a market value of more than 5 billion yuan held by northbound funds released their 2024 report cards, and their operating income grew by more than two percent year-on-year.

Among them, NAURA released a performance forecast for 2024, and it is expected that the company's total operating income and net profit attributable to the parent company in 2024 will be 29.8 billion yuan and 5.6 billion yuan respectively, with a year-on-year increase of 35% and 44% respectively.

In addition, NAURA expects that in the first quarter of 2025, the company's operating income will be 7.34 billion yuan to 8.98 billion yuan, a year-on-year increase of 23.35%-50.91%; The net profit attributable to the parent company was 1.42 billion yuan to 1.74 billion yuan, a year-on-year increase of 24.69% to 52.79%.

"The company's new products such as capacitively coupled plasma etching equipment in the field of integrated circuit equipment have achieved key technological breakthroughs, significant growth in process coverage, and the market share of a number of mature products has steadily increased, the company's market share has continued to expand, and its operating income has increased year-on-year." NAURA said in the first quarter performance forecast that the company's scale effect has gradually emerged, and the cost and expense ratio has declined steadily, so that the net profit attributable to the parent company has maintained a year-on-year increase.

The food and beverage industry, which has a heavy position in northbound funds, has also seen steady growth. In the first three quarters of 2024, the total operating income of the food and beverage industry increased by 4% year-on-year to 828.7 billion yuan, and the total net profit attributable to the parent company increased by 10% year-on-year to 179.2 billion yuan.

Among the 17 food and beverage companies with a market value of more than 1 billion yuan in the first quarter, as of April 9, 10 companies have released 2024 financial data, of which seven companies have a year-on-year increase in operating income, accounting for 70%.

In the food and beverage industry, the company with the highest market value of northbound capital holdings is Kweichow Moutai (600519. SH), its performance continues to grow. In 2024, the company's total operating income increased by 15.66% year-on-year to RMB174.144 billion, and the net profit attributable to the parent company increased by 15.38% year-on-year to RMB86.228 billion, with an average daily net profit of approximately RMB236 million.

Some brokerages said that under the pressure of the weak macro economy and the downward cycle of the liquor industry in 2024, Kweichow Moutai adheres to the consumer-centric, responds to market challenges, stabilizes Moutai's "basic market", and completes the established target plan for 2024.

Although the performance continued to grow, Kweichow Moutai lowered its performance target for 2025. The company said that the main goals in 2025 are: to achieve a total operating income increase of about 9% over the previous year, and to complete the investment in fixed assets of 4.711 billion yuan.

Caijing noted that this is the first time that Kweichow Moutai has lowered its annual performance growth rate since 2020, and it is also the first time that the company has adjusted its annual revenue growth target to single digits since 2016.

Companies with increased holdings by northbound funds also performed well.

Wind data shows that in the first quarter of 2025, northbound funds increased their holdings of 1,374 A-share companies. As of April 9, about 615 companies have released financial data for 2024, of which 536 companies have achieved profitability in net profit attributable to their parent companies, accounting for about 87.15%; The net profit attributable to the parent company of 332 companies increased year-on-year, accounting for more than half.

Among the top 10 companies in the first quarter, the net profit of the eight companies that have announced their financial data for 2024 has all increased. Among them, BYD, which ranks first in the amount of foreign investment, has continued to grow in performance.

In 2024, BYD's operating income and net profit attributable to the parent company will increase by more than two percent year-on-year. The company expects to achieve a net profit attributable to the parent company of 8.5 billion yuan to 10 billion yuan in the first quarter of 2025, a year-on-year increase of 86.04%-118.88%.

"In the first quarter, the new energy vehicle industry still maintained strong growth potential, and the company, as an industry leader, achieved a record high in sales of new energy vehicles in the same period, and overseas new energy vehicle sales achieved leapfrog growth, further consolidating the leading position of the world's first new energy vehicle sales." BYD said in the performance forecast that in addition, the company relied on the continuous expansion of scale effect and vertical integration of the strategic layout to help the group's business profitability to achieve substantial growth.

The market outlook is bullish on Chinese assets

Recently, US President Donald Trump's "reciprocal tariff" policy has triggered sharp market volatility, and the A-share Shanghai Composite Index has fluctuated but demonstrated resilience, and foreign investors are still optimistic about Chinese assets.

Meng Lei, a China equity strategy analyst at UBS Securities, believes that from the perspective of the whole year of 2025, in addition to Central Huijin and other institutions, other long-term funds will continue to enter the A-share market under the guidance of the regulatory authorities, and insurance companies, public funds and social security funds are expected to bring 1 trillion yuan, 590 billion yuan and 120 billion yuan of net inflows into the Chinese stock market in 2025.

Liu Jinjin, chief strategist of Goldman Sachs China equities, said that the U.S. tariffs have an impact on the fair value of the Chinese stock market through multiple variables, and the strategic allocation opportunities of A-shares are better than those of Hong Kong stocks.

Wang Ying, chief equity strategist at Morgan Stanley China, believes that market volatility will remain high in the short term, while the A-share market is more resilient and can be regarded as an allocation option for hedging or diversifying risks.

Specifically, foreign investors are optimistic about opportunities in A-share artificial intelligence and consumer industries, as well as dividend core assets such as telecommunications and public utilities.

"Although Hong Kong stocks have outperformed A-shares since 2025, A-shares still have good growth potential." J.P. Morgan Asset Management believes that with the continuous recovery of China's economy and further policy support, the profits of listed companies in Chinese mainland are expected to continue to increase.

In terms of specific industries, J.P. Morgan Asset Management believes that industries with continuous improvement in supply and demand such as power batteries are worth paying attention to. "At the same time, the breakthrough progress of AI technology may be a replica of the historic transformation opportunities similar to those in the power and Internet industries in the past, and investors can continue to track their development and look for long-term investment opportunities related to the development of the AI industry, such as the hardware manufacturing sector."

Goldman Sachs said that at a time when overseas external risks are intensifying, it will continue to pay attention to China's domestic, policy-driven investment opportunities, continue to favor the consumer sector in industry allocation, and focus on the selection of artificial intelligence beneficiary stocks, export companies for emerging markets and cash return themes in investment themes.

Pictet Asset Management, on the other hand, is bullish on utilities and telecommunications, believing that they are expected to outperform the market due to their defensive attributes, service orientation and attractive valuations.

Fidelity International fund manager Ian Samson is also bullish on the telecom sector. It believes that in the past two years, the profitability of China's communication service industry has increased significantly, and despite the impact of Sino-US trade policies, many companies are at the forefront of communication technology and AI technology, maintaining strong development prospects. "Given the propensity of Chinese communications services companies for domestic demand, they may be immune to the direct impact of the U.S. tariffs."

Huatai Securities released a research report saying that from a medium-term perspective, foreign investors may mainly focus on three clues in the future: first, the technology hardware industry with higher valuation prospects in the context of upward revision of profit expectations; the second is the direction of A50 and dividends, which have stable return on net assets and dividends and low valuations, especially offensive varieties such as communications; Third, there is still room for further allocation in the consumption sector that has been preferred by foreign investors for a long time.

Singaporean institution Bisheng Investment related people told Caijing that they are optimistic about the investment opportunities brought by China's economic recovery, and the company's portfolio layout is the most sensitive to China's economic recovery and can benefit from the resonance of the macroeconomy and capital market Seven main investment lines, including the recovery of local government investment, the recovery of optional consumption and mandatory consumption, and China's relative competitive advantage in the high-tech field continues to improve. The company's high-allocation industries include information technology, healthcare and consumer goods.