17 December Emerging Markets

China & HK Industrials: EM’s Key Overweight Grows Stronger

Global Emerging Markets

China & HK Industrials: EM’s Key Overweight Grows Stronger

December 18th 2025

Executive Summary
China Industrials have become one of the clearest expressions of conviction within the Global EM equity landscape. Despite a declining benchmark weight, active managers have steadily increased exposure, backed by record participation, broad stock-level engagement, and clear signs of fresh inflows.

While headline names like CATL dominate fund holdings, investor interest is widening to a deeper bench of emerging players. At the same time, the sector’s second tier continues to reflect shifting investor sentiment — a reminder that while conviction is high, positioning remains selective.

But the message is clear: China Industrials are back in focus, and for now, fund managers are positioning with increased conviction.

Click on the Report Link below for access to the latest China & HK Industrials Market Intelligence Report.

China Industrials Fund Positioning:  Rising to new Highs
Exposure to China’s Industrials sector is gaining momentum. While the MSCI EM benchmark weight has gradually declined over the last 3 years (chart 10), active GEM fund allocations have been moving higher and are now closing in on all-time highs (chart 7). Participation has also widened, with a record 90.45% of funds now holding a position (chart 8). At the same time, both the net overweight (chart 13) and the share of funds overweight (chart 14) have climbed to new peaks, reflecting a growing sense of conviction across the active manager universe.

Peer Positioning:  THE Conviction Overweight
Among all country and sector combinations across the Global EM universe, China & HK Industrials stand out as a clear conviction overweight. They currently rank as the seventh largest active weight overall (chart 1) — behind the dominant Tech exposures in Taiwan and South Korea — and represent the fourth largest sector allocation within China & HK. But it’s the scale of the overweight that sets them apart: 76.4% of GEM funds are positioned above benchmark (chart 5), with an average active weight of +1.67%, far ahead of any other country/sector pair (chart 4). The breadth of investment is also notable, with holdings spread across 204 companies — a strong indication of the depth and diversity of opportunities that managers are finding in the space (chart 6).

Fund Rotation:  Strong Opening Activity
Fund activity in China Industrials has picked up meaningfully over the past year. Twenty-seven GEM funds have initiated new positions, compared to just nine closures, while existing holders like East Capital Global EM Sustainable and Amonis Equity EM have significantly added to their exposure. Although the sector hasn’t led in outright rotation versus other country/sector peers (see page 6 in the PDF report) , every key ownership metric has moved higher — a clear sign that active managers are adjusting positioning with growing confidence.

Stock Level Analysis:  Leaders emerge, but changing fortunes among 2nd tier. 
At the stock level, a few clear leaders have emerged within the sector — but the picture further down the ranks is more mixed. Contemporary Amperex Technology (CATL) stands out as the most widely held name, with 51% of GEM funds in our analysis holding a position. As chart 114 shows, ownership has climbed over the past two years, reaching record highs. But the sector also features several examples of sharp reversals in sentiment. Names like NARI Technology (chart 115), Techtronic Industries (chart 116), and ZTO Express (chart 119) have all seen meaningful retreats in ownership after building up strong investor bases, underscoring the shifting fortunes and potential volatility that can come with owning companies in the sector.

Stock to Watch
Chart 120 highlights three names seeing the strongest pickup in ownership over the past year. Following CATL, both DiDi Global and Full Truck Alliance have attracted significant new interest, pushing fund participation to new highs. In contrast, chart 121 shows the biggest fallers, with NARI Technology, Sungrow Power Supply, and China Communication Services losing the most investors over the period. Looking ahead, several potential rising stars are emerging (chart 122). CMOC Group, Seiyuan Electric, and Anker Innovation — alongside Full Truck and DiDi — have seen rising inflows but remain lightly held, suggesting room for further adoption. Meanwhile, longer-term laggards such as China Conch Ventures, Harbin Electric, and ZhuZhou CRRC Time Electric were once widely owned but have since drifted off the radar.

AFI – Market Intelligence Report:  China & HK Industrials

Please click on the link opposite for the full positioning report on the China & HK Industrials sector.  It contains 133 charts, including fund-level detail at the country/sector, industry and stock level, breakdowns by Style, Market Cap Focus and Benchmark Independence, together with a full gap analysis on past holders and potential buyers in the sector.  

 

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