UBS strategists led by Lei Meng noted in an October 14 report that China's A-share technology sector has undergone a rapid correction since late September. The overweight ratio of public funds in the sector reached a historical peak of 18.5% in Q2 2026, while the proportion of actively managed technology funds also rose to a historical high of 27.5%. Additionally, in July 2026, the A-share margin balance decreased by RMB 408 billion in a single month, marking the second largest decline on record.

UBS believes these data indicate a systematic unwinding of crowded positions in the technology sector. The weekly turnover ratio of the broad technology sector has fallen from 49.7% in early July to 37.2%, significantly reducing tail risks. Despite short-term redemption pressure from public funds, the fundamental earnings of A-share companies remain strong, with overall A-share earnings growth accelerating to 29.4% year-on-year in Q2 2026, and an estimated full-year growth of 15%. Moreover, market consensus earnings forecasts have not been revised down with share prices. The report also observed that recent inflows into broad-based ETFs have been diversified, covering multiple indices, signaling market stabilization and a broader support base.