Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **China Equity Strategy** and the dynamics of **foreign fund flows** into Chinese equities, particularly in the context of **A-shares** and **Hong Kong** markets [1][2]. Core Insights - **Foreign Inflows**: In December, foreign inflows into Chinese equities accelerated to **US$3.5 billion**, driven by **US$4.4 billion** from passive funds and **US$0.9 billion** from active funds [1][11]. - **Cumulative Inflows**: For 2025, cumulative foreign long-only fund inflows reached **US$14 billion**, a significant recovery compared to **US$26 billion** outflow in 2023-24 [11]. - **Market Liquidity**: Onshore equity mutual fund AUM rose sharply in December, with a net increase of **Rmb2.2 trillion** in 2025, nearly double the **Rmb1.0 trillion** increase in 2024 [11][12]. - **Sector Performance**: Active fund managers increased their positions in sectors such as **Insurance**, **Capital Goods**, and **Consumer Discretionary**, while trimming positions in **Bank**, **Pharmaceutical**, and **Consumer Durables & Apparel** [11]. Fund Flow Dynamics - **Passive vs. Active Funds**: Passive funds saw inflows of **US$4.4 billion** in December, while active funds experienced outflows of **US$0.9 billion**, indicating a shift in investor preference towards passive investment strategies [11][12]. - **Retail Participation**: Retail investor activity remained stable, with new SSE account openings slightly increasing to **2.6 million** in December, compared to **2.4 million** in November [21]. Additional Insights - **Money Market Funds**: AUM for money market funds declined to **Rmb116 billion** in December, reflecting a reallocation of assets towards equities [31]. - **Private Fund Activity**: Private fund AUM remained stable after a significant increase in October, indicating continued interest from high-net-worth investors [24]. - **Sector-Specific Trends**: Companies like **Ping An Insurance**, **PDD**, and **Alibaba** saw increased investment, while **CCB**, **Xiaomi**, and **Anta** were trimmed by active fund managers [11]. Conclusion - The overall trend indicates a positive shift in foreign investment towards Chinese equities, particularly through passive funds, while active funds are experiencing outflows. The significant increase in AUM for onshore equity mutual funds suggests a strong reallocation towards equities, reflecting investor confidence in the market's recovery.