For A-shares, July is a crucial month as it marks the end of the first half of the year and the release of economic data, which is a time for summary and review. It is also the first month of the second half of the year, and the policy orientation is highly noteworthy, especially the stance taken at the end-of-July Politburo meeting, which has a significant impact on the market. This year's July is further highlighted by the once-in-five-years focus on economic reform during the Third Plenary Session of the Central Committee, making it even more important.

Despite a plethora of positive developments such as major reforms, potential interest rate cuts abroad, and domestic rate cuts, the performance of the A-share market has shown a sense of "numbness." This numbness is not only evident among retail and fund investors but may also have begun to affect institutional investors. The market's trading activity has plummeted to an all-time low, with the total market turnover sliding to the level of five to six hundred billion.

Although the market has little to commend, the disclosure of the semi-annual reports of public funds, which are related to the profits and losses of hundreds of millions of fund investors, is still worth careful study. At least this can help us understand how the losses occurred.

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Looking at the performance of actively managed equity funds, which are mainly preferred by fund investors, represented by the stock fund index (930950.CSI), the first half of the year's performance still significantly lags behind the main broad-market indices such as the CSI 300 and the Shanghai Composite Index. As of July 23, the stock fund index had a year-to-date decline of 7.62%, which is essentially half of the full-year decline of 14.6% in 2023.

Analyzing the reasons is not difficult. Historically, public funds have favored growth stocks, such as pharmaceuticals, consumer goods, new energy, and semiconductors, which were once the darlings of public funds. However, in the first half of the year or over the past three years, the market has been dominated by value styles, and public funds that prefer growth have naturally suffered heavy losses.

Understanding from a capital perspective is even easier. In the first half of the year, public funds continued to bleed, not only with new fund issuances remaining at historical lows but also facing continuous redemptions of existing funds. According to the shares of actively managed equity funds, there have been five consecutive quarters of net redemptions, and the first quarter of this year saw the largest single-quarter redemption since 2005. The main incremental capital in the market is contributed by the national team, which primarily purchases CSI 300 index funds. The industries and sectors heavily invested in by public funds rarely see an inflow of incremental capital, resulting in a naturally dismal performance.

Beyond the overall performance, what is more worth paying attention to may be the views and opinions of fund managers on the future market in the semi-annual reports of public funds. Based on the semi-annual reports of public funds that have been announced, in the bear market that has lasted for more than three years, with public funds suffering significant losses and under strict regulatory environments, the proportion of fund managers "writing short essays" in the reports has significantly decreased, which may also indicate a certain degree of market sentiment numbness.

I would also like to explain why it is important to pay attention to the views expressed by these fund managers in their quarterly reports. First, although the scale of actively managed equity funds has shrunk, it still amounts to several trillion, making it one of the main long-term capital sources in the market. The views of fund managers on the future market represent the direction of a large portion of future capital allocation. Second, funds are the most suitable product for ordinary retail investors to allocate equity assets. Although the performance of actively managed equity funds has not been good in recent years, this does not affect future allocations to funds. Third, although the performance of public fund managers varies, the overall level of public fund managers far exceeds that of individual investors, and they are the group with the deepest understanding of the market, which is an undeniable fact. Individual cases do not represent the industry as a whole. For investors, choosing good products and good fund managers is the most appropriate approach; abandoning the essential because of a minor issue may not be suitable.

Overall, most fund managers have expressed their views on dividends, just as there was heated discussion about "core assets" in the past. However, there is a huge divergence of opinions. Many value-oriented players who have performed well in the past two years have expressed concerns about the rapid approach of dividends. Of course, there are also fund managers who continue to be optimistic and increase their allocation to dividends. There are also many expressions regarding the pharmaceuticals, consumer goods, and new energy that funds have heavily invested in. The outlook for pharmaceuticals is generally optimistic, with the consensus that it is one of the few industries with certain demand and current value. There is also a significant divergence of views on consumer goods and new energy, whether it is the domestic demand closely related to the economy or the judgment of the supply-demand balance point of new energy, there are considerable differences. The popular artificial intelligence is no exception; some people focus on the long term, believe that the opportunities are vast, and have started to allocate, while some fund managers believe that the application is poor and the implementation does not meet expectations.

Taking the highly regarded fund manager Zhang Kun as an example, in terms of scale, Zhang Kun's current fund management scale exceeds 60 billion yuan, and he remains a top-tier figure in the market.In the second-quarter report, Zhang Kun still expressed a very optimistic view of the market:

Firstly, the market, disregarding the central bank's repeated warnings, has rushed madly towards long-term government bonds and dividend assets with similar characteristics, while avoiding industries related to domestic demand, indicating that the market is already extremely pessimistic.

Secondly, Zhang Kun does not agree with the market's concerns about economic stagnation. Based on the recognition of the diligence and wisdom of the Chinese nation, Zhang Kun remains optimistic about the economy.

Thirdly, looking at the goal of reaching the per capita GDP level of a medium-developed country by 2035, there is still a lot of room for improvement in the domestic per capita standard of living. In the process of growth, there will be a group of enterprises that provide high-quality products and services that can continue to grow and create returns. And even if we take a conservative view that these enterprises do not grow, the dividend yields of these enterprises have already approached or exceeded some traditional dividend stocks.

Finally, Zhang Kun believes that pessimistic expectations will ultimately be proven wrong. The biggest risk investors currently face is the privatization of high-quality enterprises, where controlling shareholders are no longer willing to share the future development results of the enterprise with circulating shareholders. However, this risk is not high at present.

The reason why I personally recognize and have long-term attention to Zhang Kun is that Zhang Kun's investment philosophy and actions have always been consistent. For fund investors, it is always necessary to understand one truth: buying an actively managed fund is buying a fund manager. You need to ensure trust in the fund manager to entrust your money to him for management. If you cannot understand and identify with the fund manager, investing in funds is no different from opening a blind box, and it is more secure to buy passive index funds.

Although this optimistic sentiment about the economy in the quarterly report does not match the current market trend and sentiment, as an equity product investment, it is necessary to go against the trend to some extent. As the saying goes, "Pessimists are often right, but optimists are often successful."

Let's take a look at Tan Li, a value-style fund manager with good performance, who is currently managing a scale of over 20 billion and is one of the few hundred-billion fund managers in the market who have increased their scale against the trend in the past three quarters.

In the second-quarter report, Tan Li, who once won with value, expressed concerns about dividend assets and reduced some dividend assets, especially upstream resource stocks such as CNOOC and China Shenhua, which have been significantly reduced.The viewpoint is twofold: First, after several years of increase, the valuation of dividend-type assets has become more reasonable, leading to a decrease in investment attractiveness, hence reducing the holdings of some dividend assets. Second, regarding growth stocks, the stock prices of a large number of robustly growing companies have been discounted with more pessimistic expectations, and there will be a more active search for bottom assets with opportunities.