Three years’ timeframe: Zhao Yi positions for the third quarter report with a "two ends" and "three lines" layout.

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The Quanguo Xuyuan Three-Year Holding Period Fund, established on October 18, 2022, will reach its three-year term in October 2025. Almost simultaneously, on October 17, Quanguo Xuyuan released its third quarter report ahead of schedule, revealing Zhao Yi's latest views and holdings.

Given his once-annual performance, Zhao Yi's current outlook on the market and opportunities is something worth noting.

No Historical Experience for Reference

In this quarterly report, Zhao Yi first summarized the market. He believes that after a year of first declining and then rebounding in 2024, as we enter 2025, the overall situation is one of upward volatility. Technology sectors represented by AI computing power, robotics, and semiconductors performed strongly in the third quarter.

In the third quarter, this fund rose about 45.58%. Zhao Yi summarized that, in terms of operations, thanks to marginal improvement in market liquidity, the share prices of some companies the fund had previously held on to and favored continued to recover, while future potential directions were also actively laid out.

He remarked that pinpointing the market bottom is relatively difficult, but when high-quality companies undergo rapid corrections and enter stages with good value, opportunities will be seized by increasing the concentration of holdings in the portfolio.

At the same time, he expressed that he always adheres to company fundamentals and industry competitive landscape as the core stock selection elements, deeply cultivating high-end manufacturing and technology, choosing outstanding companies with global competitiveness, and growing together with them. While maintaining a stable investment style, continuous in-depth research will be used to optimize portfolio structure and broaden investment targets.

“Two-End” Opportunities in Portfolio Allocation

By the end of the third quarter, Zhao Yi's portfolio was mainly concentrated in high-end manufacturing sectors such as new energy, electronics, machinery, military industry, as well as Hong Kong-listed internet companies. Overall, a "two-end configuration" framework was presented: one end focuses on Tech AI; the other on distress reversal (new energy, military industry).

Looking at the top ten holdings, there are both internet companies such as Tencent, Meituan, Kuaishou, and new energy stocks such as Kedali, CATL (Contemporary Amperex Technology), and Enjie Shares.

Three Main Lines in the Third Quarter

He also mentioned in the quarterly report that in AI-related positioning, the configuration revolves around three main lines:

The first is efficiency-improving internet leaders, with Meta as an example overseas, where AI investment has significantly enhanced operational efficiency, such as more effective advertising and improved cost structures;

The second is companies driven by new application scenarios, represented overseas by Palantir, where AI brings new sources of revenue;

The third is computing power and cloud service companies, with Microsoft as an overseas example, where integrating AI tools boosts high growth in cloud business.

Increased Holdings in Midstream Lithium Battery Materials

In new energy, he focuses on the lithium battery industrial chain. Since the first quarter of 2023, fixed asset investment in lithium battery materials has seen a continuous year-on-year decline in growth rate, while demand growth has remained at a high level, presenting a market-oriented clearing feature in the supply-demand structure.

He also noted that from late July to mid-August, he made intensive visits to midstream lithium battery material, battery and other companies. Leading companies generally are already in full production, and with industry demand continuing to surge, supply is expected to tighten or even fall short of demand next year. With overseas bases of Chinese companies starting mass deliveries after customs tariffs have been clarified, the third quarter saw increased holdings in midstream lithium battery material companies, providing a significant positive return to the portfolio. Structurally, there is a major focus on hexafluorophosphate, separators and other links where supply-demand tension next year is relatively clear and the capacity expansion cycle is long. He judges that although this round of lithium battery material price elasticity may be less steep than the previous round, the cycle of both volume and price growth will be healthier and more sustainable.

In the military industry, since the third quarter of 2024, improvements in contract liabilities indicate that industry orders have entered an uptrend; combined with increased military export demand driven by overseas geopolitical conflicts, this will create a dual-driven situation of domestic demand recovery and rising overseas demand. As equipment evolves from mechanization to informatization and now to intelligence, the overall supply landscape will also change, making it even more essential to choose stocks with strong competitive barriers.

Bullish on the Stock Market

Zhao Yi also stated that currently, the long-term and steadily improving trend of China’s equity market is becoming increasingly clear. The U.S.'s reciprocal tariff policy has been clearly eased, and dollar liquidity is also expected to reach a turning point, which will further boost liquidity in the Chinese stock market. Since the beginning of this year, China's economy has maintained stable and resilient development. Overseas funds are also gradually adopting a more positive attitude toward China's equity market. He remains confident in the long-term positive trend and the drive of China’s high-quality economic development.

However, in this context, the equity allocation in the portfolio was reduced by more than 7 percentage points, most likely in advance preparation for potential liquidity needs.

Risk Warning and DisclaimerThe market carries risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the individual investment objectives, financial situations, or needs of specific users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their individual circumstances. Investing based on this content is at your own risk. ```