More than half of private equity funds maintain heavy stock positions over the holiday, can the market stabilize?

On the eve of the long holiday, volatility in the A-share market has intensified, and some capital has chosen to take a risk-averse stance to avoid uncertainties during the holiday period.

The latest survey results from Private Equity PaiPaiWang show that most private equity institutions have not significantly reduced their positions, and generally choose to hold heavy stock positions through the holiday. Specifically, among the private equity institutions surveyed, 57.70% of them tend to hold heavy or full positions (position ratio > 80%) through the holiday.

In terms of strategy selection, 34.62% of private equity institutions adopt the barbell strategy, allocating low-valued value blue chips as a safety cushion, paired with high-prosperity tech growth tracks to pursue returns. Another 30.77% of institutions are relatively more aggressive, insisting on focusing on the main line of tech growth.

Looking ahead to the post-holiday period, multiple private equity firms are optimistic about the market stabilizing and rebounding. Many private equity institutions point out that various internal and external negative factors before the holiday have been fully digested, and the return of risk-averse capital after the holiday is expected to drive the repair of market sentiment. However, some private equity practitioners also warn of risks, stating that the current market lacks strong positive catalysts, making it difficult to see a unilateral sharp rise. The market will most likely continue to maintain a volatile and differentiated pattern after the holiday, and investors still need to respond cautiously to market fluctuations.

Many Private Equity Firms Choose to Hold Heavy Stock Positions Through the Long Holiday

On the eve of the long holiday, market volatility has intensified, and some capital, worried about the uncertainties of the long holiday, has chosen to avoid risks. But even with strong market uncertainties in the future, many private equity institutions still operate with relatively high positions and choose to hold stocks through the holiday.

The survey results from Private Equity PaiPaiWang show that 57.70% of private equity firms tend to hold heavy or full positions (position ratio > 80%) through the holiday, believing that the pre-holiday adjustment has released risks, and they are optimistic about the post-holiday structural market and do not want to miss the rally.

Starstone Investment's analysis states that although the stock market performance from September 23 to 24 shows that on-market capital has low willingness to go long and a large amount of capital is taking profits, we still believe that we should not make large position adjustments for short-term risk aversion, and we prefer to focus on the impact of medium and long-term factors on the stock market trend and investment opportunities.

The institution also points out that from the perspective of calendar effect, there are always some capitals leaving the market before the holiday due to risk aversion sentiment, and these capitals will always return after the long holiday, so the stock market is expected to recover moderately after the holiday.

Cheng Tianyi, senior researcher of Qingdao Anzhi Investment, also emphasizes that from historical experience, the A-share market has a certain calendar effect, that is, the probability of pre-holiday adjustment and post-holiday rebound is relatively high. The logic behind this is that part of the capital chooses to leave the market before the long holiday out of risk aversion demand, and the market tends to respond to negative news in advance.

In addition, 19.23% of private equity firms tend to hold moderately heavy positions (60%-80%) through the holiday, believing that on the basis of maintaining a base position to bet on returns, they will reserve part of the cash to cope with unexpected news disturbances during the holiday.

Another 15.38% of private equity firms tend to hold neutral and defensive positions (40%-60%) through the holiday, believing that the current market profit-making effect has weakened, and they should adopt a strategy that balances offense and defense to cope with the situation. Only 7.69% of private equity firms tend to hold light or empty positions (position ratio < 40%) and hold cash through the holiday, worried about peripheral market fluctuations during the holiday and profit-taking selling pressure after the holiday, prioritizing risk control.

Barbell Strategy and Tech Growth Strategy Are Most Favored

Specifically in terms of investment strategy selection, the recent volatility of the tech sector has intensified, so many private equity institutions choose to use the barbell allocation strategy to diversify risks.

The survey results from Private Equity PaiPaiWang show that 34.62% of private equity firms tend to adopt a barbell-style balanced allocation, with one end allocated high-dividend/low-valued value blue chips as a safety cushion, and the other end allocated high-prosperity tech growth tracks to pursue flexible returns.

Taking Anjue Asset as an example, Liu Yan, chairman of this private equity institution, said that the current market is in a multi-layered uncertain environment intertwined with weak reality and strong policy expectations, as well as overseas volatility and long holiday wait-and-see sentiment. Style rotation is accelerating and the mid-term main line is not yet clear, so they prefer to adopt the barbell-style balanced allocation approach to cope with the situation, which complements the 40%-60% neutral and defensive total position to achieve a balance between offense and defense.

In addition, a considerable number of private equity institutions are relatively more aggressive and still focus on the main line of tech growth. Specifically, 30.77% of private equity firms tend to focus on the main line of tech growth, believing that the tech growth style represented by the new quality productivity direction is still the core main line in the future;

In addition, 19.23% of private equity firms tend to focus on the value blue chip direction, optimistic about varieties with low valuation, defensive attributes and improved supply and demand; 15.38% of private equity firms tend to switch and rotate between high and low tracks, avoiding previously crowded tracks, and focusing on exploring lagging sectors that may catch up after the holiday or individual stocks with the ability to deliver performance.

The Market Is Expected to Stabilize After the Holiday

Although pre-holiday market volatility has intensified, industry insiders believe that under the current market environment, the downside space of the market is limited.

Yuan Huaming, general manager of Huahui Chuangfu Investment, pointed out that the market will generally maintain high-level volatility recently, the structural performance of sector rotation is supported by ample market liquidity, and with policy bottoming support, the downside space is small.

Looking ahead to the post-holiday period, many private equity institutions believe that the market is expected to stabilize.

Starstone Investment believes that at the current stage, whether it is the external Fed's interest rate hike expectations or the divergence over the progress of the AI industry, the core negative factors at home and abroad have been priced by the market or have landed in stages before the holiday. As long as the news environment remains stable during the holiday, it will provide a favorable environment for the repair of market risk appetite after the holiday.

Chen Xingwen, chief strategy officer of Kuroki Capital, also holds the judgment that the market will stabilize and rise after the holiday. Chen Xingwen pointed out that from the capital side, the departure of part of the risk-averse capital before the holiday has just reserved space for their return after the holiday, and the trend of increasing allocation of medium and long-term capital such as insurance, social security and public funds is structural and irreversible. From the fundamental side, macro policies continue to exert efforts, corporate profitability is stepping out of the bottom area, and the third quarterly reports are expected to become a window to verify the profit inflection point. From the sentiment side, the repair of market risk appetite is often not linear, but is completed quietly amid hesitation. The current widespread caution among investors has instead become the fuel for the in-depth development of the market.

However, some industry insiders also emphasize that the current market direction is not yet clear, and investors still need to pay attention to the risk of market volatility.

Starstone Investment also warns that the current market still lacks substantial strong positive catalysts, and it is difficult for the index to see a sharp rebound. On the whole, the market will most likely maintain a volatile and differentiated pattern, systematic opportunities are not yet clear, but structural rotation opportunities are still worth paying attention to.

Liu Yan, chairman of Anjue Asset, also predicts that after the long holiday, the A-share market will present the main tone of index range-bound volatility and deep structural differentiation. The core logic of the market will shift from pricing the holiday uncertainties to the rebalancing of policy expectations and fundamental reality, and it is difficult to see a unilateral general rise or general fall trend market.

This article is from the WeChat Official Account "ChiNext Observation", author: Li Di, authorized for release by 36Kr.