Global Active Funds End Four-Year Underweight, Repositioning in Chinese Equities
nashnova research
Global active long-only funds raised their average China allocation back to benchmark-neutral in June, ending a four-year underweight — but moving from neutral to outright overweight is a different step entirely.
Four years of underweight just ended — what does that mean?
Bank of America analyzed 2,767 global funds holding a combined $562 billion in Chinese equities; their average allocation has returned to benchmark-neutral.
This means → for four straight years, large global funds were systematically under-buying China; that gap has now closed back to the standard line — no more, no less.
In plain terms = fund managers are no longer actively avoiding China, but they haven't piled in either — the stance shifted from "don't touch" to "worth a look."
Why is capital willing to come back?
Two drivers stand out: relatively cheap valuations and emerging AI-related investment opportunities.
UBS Asset Management's October 1 report flagged China as a "key opportunity," highlighting valuation appeal in tech, AI, and advanced manufacturing.
BlackRock's Q4 global outlook, published in September, maintained a neutral stance on Chinese equities while noting opportunities in physical AI.
Is Hong Kong the more attractive entry point?
Everbright Securities International strategist Wu Qiming said Chinese assets are likely to keep drawing global investor attention, especially as Hong Kong valuations remain at relatively low levels.
This means → in global funds' eyes, Hong Kong stocks may be the best value-for-money gateway into China right now.
He cautioned, however, that external uncertainties remain elevated — ending the underweight does not equal a broad shift to bullish.
What's still missing for a move to overweight?
Going from underweight to neutral is only the first step; whether this evolves into active overweighting hinges on two conditions.
First, the external environment — whether trade friction, geopolitical tensions, and other uncertainties ease.
Second, whether corporate earnings deliver — cheap valuations are the starting point, but fund managers need to see profits actually materialize.
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