Core Insights - The article discusses the recent changes in public fund holdings as revealed in the Q2 2025 reports, highlighting significant trends in market differentiation and sector allocations [2] Group 1: High and Low Phenomena - Active equity funds have reached a record high allocation to Hong Kong stocks, with the proportion of holdings in the Hong Kong Stock Connect reaching 19.91% in Q2 2025, up from 19.10% in Q1 2025 [3] - The healthcare sector in Hong Kong saw a 6.01 percentage point increase in market value allocation, while the financial sector increased by 2.26 percentage points [3][4] Group 2: Low Allocation to Specific Sectors - Active funds have a notably low allocation to liquor stocks, with the proportion of holdings in the food and beverage sector at 6.8% in Q2 2025. Excluding liquor-themed funds, the allocation to liquor stocks dropped from 11.7% in Q1 2021 to 2% in Q2 2025 [5] - This decline mirrors a previous trend from 2012, where the allocation to liquor stocks fell from 18.9% to 2.5% due to regulatory and safety concerns [5] Group 3: Bank Stocks Allocation - The proportion of active equity funds holding bank stocks increased to 4.88% in Q2 2025, indicating a rise in both quantity and price. However, the under-allocation remains significant, being the largest among 31 sectors [7] - In contrast, fixed income plus funds showed a 6.3% overweight in the banking sector, highlighting a divergence in sector allocation strategies [7] Group 4: Valuation Trends - Public fund heavyweights are currently at historical low valuation levels, with median P/E ratios of 22.9x and 26.8x for the top 100 and top 400 stocks, respectively, compared to the overall A-share median P/E ratio of 0.55x and 0.64x [8] - This valuation trend indicates a significant shift from a premium to a discount relative to the broader market since early 2021 [8][9] Group 5: Concentration of Holdings - The concentration of holdings in active equity funds continues to decline, with the proportion of heavyweights accounting for 55.52% of total equity assets, down 0.56 percentage points from the previous quarter [9] - The number of heavyweights held by funds increased to 2,694, reflecting a broader selection of stocks in response to market volatility [9][10]