Technology stocks pulled back from highs, pharmaceutical stocks staged a strong rally, and the number of 'double-return funds' shrank significantly.

The first three quarters of A-share trading have come to a close. The market shifted from the one-sided technology rally in the first half of the year toward a more balanced structure, with internal structural characteristics playing out to the extreme.

Entering the third quarter, the market correction intensified further. The ChiNext Index and the STAR 50 Index plunged 27.8% and 30.7% respectively in the third quarter, both setting their largest single-quarter drawdown records in history.

Overall, in the first three quarters of this year, A-share major indices diverged sharply. Only the STAR 50 Index bucked the trend to close higher, gaining 13.82% cumulatively, making it the only broad-based index with notable performance across the entire market. All other mainstream indices closed lower, with the Beijing 50 Index performing the worst, dropping sharply by 27.83%.

The third quarter A-share market has officially wrapped up, with the ChiNext Index and STAR 50 Index plunging 27.8% and 30.7% respectively in the third quarter, both setting their largest single-quarter declines in history while also significantly underperforming other major market indices.

On the active equity fund front, Wind data shows that in the first three quarters of this year, the average return of partial-equity hybrid funds was 2.59%, and the arithmetic average return of active equity funds was 1.82%. More than half of active equity funds achieved positive returns, maintaining an overall structural wealth effect, but the performance gap between funds was dramatically widened, with a 163.56 percentage point difference between the best and worst performers.

Two Double-Return Funds Emerge, Yang Zongchang Sweeps Top Two Spots, Products of Top-Tier Fund Managers Cluster on the List

Driven by the structural market, only two active equity funds achieved doubled returns during the year across the entire market, both managed by Yang Zongchang of E Fund. Among them, E Fund Supply Reform won the championship for the first three quarters with a return of 115.67%, while E Fund Industry Opportunities followed closely in second place with 111.62%.

It is worth noting that the vast majority of returns for these two products came from the first half of the year. Entering the highly volatile third quarter, the fund manager controlled drawdowns through earlier position adjustments, preserving the gains from earlier periods. The 10-billion-scale E Fund Supply Reform had a third-quarter drawdown of 9.42%; the 606 million yuan-scale E Fund Industry Opportunities had a single-quarter drawdown of 8.72%, showing impressive drawdown control among high-volatility growth funds.

Compared to the peak of 199 double-return funds across the market at the end of June, after the deep third-quarter correction, the number of double-return funds shrank dramatically to just 2, fully reflecting the impact of this round of technology sector pullback.

Third on the list is Huaian Trend Momentum managed by Chen Siyu, with a return of 96.66% in the first three quarters. The fund's scale is only 335 million yuan, making it the smallest product among the top ten performers; Nuokan Innovation Drive ranked fourth with a return of 94.83%; Oriental Artificial Intelligence Theme, managed by Yan Kai with a scale of 35.125 billion yuan, ranked fifth with a return of 92.68%, also the largest fund on the top ten list.

SWS MU Smart Drive, Guotai Semiconductor Manufacturing Select, Caitong Multi-Strategy Fuxin, Yinhua Integrated Circuit, and Caitong Craftsmanship Preferred One-Year Holding all made it into the top ten performance rankings.

Scanning the top 30 gainers list reveals an obvious 'clustering' phenomenon among fund managers. Caitong Fund's Jin Zicai had 6 products in the top 30, making him the fund manager with the most entries; Huashang Fund's Liu Li, Yinhua Fund's Fang Jian, and Oriental Fund's Yan Kai also had multiple products on the list.

At the sector level, the best-performing funds were highly concentrated in the technology growth main line, with semiconductor integrated circuits, artificial intelligence, and the digital economy being the primary overweight directions, which perfectly aligned with the technology-led market rally in the first half of 2026. However, this was followed by collective declines in net values across the sector in the third quarter, with all top 30 products posting negative returns in the third quarter.

Third Quarter Style Shift, Pharmaceutical Theme Rises Strongly to Take Over the Market

In the first half of the year, the technology growth sector stood out alone, but in the just-concluded third quarter, the market main line underwent a significant switch. The technology sector corrected sharply, capital sought new offensive directions, and the pharmaceutical and healthcare sector staged a strong recovery, dominating the third-quarter fund gain rankings.

Among the top 10 active equity funds by third-quarter return, 9 were pharmaceutical and healthcare themed. China Merchants Fund's Li Jiacun alone swept the top four: China Merchants Frontier Healthcare surged 46.6% in the third quarter, while China Merchants Quality Growth, China Merchants Innovation Growth, and China Merchants Pharmaceutical Health Industry rose 45.19%, 44.58%, and 40.62% respectively.

CXO, innovative drugs, and medical devices became the core drivers of this round of pharmaceutical rally. Li Jiacun previously noted in an interview that the CXO sector may be standing at the starting point of a new prosperity cycle, with domestic leading companies already deeply embedded in multinational pharmaceutical supply chains, with orders, revenue, and profits accelerating simultaneously; new molecule CDMO orders such as ADC and small nucleic acids continue to shift domestically, further consolidating the competitive advantages of domestic leaders.

In addition, Huatai-PineBridge Medical Health managed by Zhang Hong of Huatai-PineBridge Fund ranked fifth with a single-quarter return of 37.04%, while multiple pharmaceutical funds including GF Pharmaceutical Select and Qianhai Open Source Medical Health saw single-quarter gains exceeding 30%.

Beyond the pharmaceutical sector, cyclical sectors also staged a recovery. Multiple cyclical-themed products including Oriental Xingrui Trend Navigator, Puyin Prosperity Select, Wanji Macro Timing Multi-Strategy, Wanji Xinli, Dacheng Core Trend, Huaxia Xiangyang Two-Year Regular Open, and Wanji Cyclical Vision charged into the third-quarter top 30, while the veteran micro-cap strategy fund Jinyuan Shunan Yuanqi also reappeared on the list.

The technology sector correction and the rise of pharmaceutical and cyclical sectors clearly reflected the third-quarter market style rebalancing.

Divergence Intensifies, 13 Active Equity Funds Drop More Than 40%

While some funds doubled their net values, many products suffered deep drawdowns. As of September 30, all top 30 active equity funds on the first three quarters decline list had losses exceeding 36%, with manufacturing upgrade, low-carbon economy, new energy, and some technology directions becoming the 'disaster zones,' showing extreme divergence within the technology growth sector.

Penghua Manufacturing Upgrade topped the decline list with a year-to-date drop of 49.74%. Looking at the quarterly report position trajectory, the fund significantly adjusted its holdings structure from the end of 2025 to the second quarter of 2026, shifting from auto parts to commercial aerospace, semiconductor equipment, and new energy sectors, and further overweighting the AI industry chain in the second quarter, only to coincide with a sharp sector correction that severely damaged its net value.

Guotai Jinxin and Guotai Growth Preferred posted year-to-date declines of 47.89% and 47.76% respectively, ranking second and third. A total of 13 active equity funds across the market dropped more than 40% in the first three quarters, including Tongtai Huize, Xinhua Low-Carbon Economy, and Great Wall Emerging Industry.

Fourth Quarter Outlook: Consolidation Remains the Main Theme, Balanced Allocation to Cope with Rotation

Standing at the starting point of the fourth quarter, multiple public fund companies have released market assessments. Institutions generally believe A-shares will maintain a consolidation pattern, with style rebalancing and sector rotation being market keywords, while also needing to guard against uncertainties from overseas macro factors.

Wanji Fund stated that current market incremental capital is limited, and pessimistic expectations on the domestic macro level have already been fully digested. The market is expected to slowly grind higher amid sector rotation in the fourth quarter, but overseas factors such as the US midterm elections, interest rate hike expectation divergence, and geopolitical conflicts will still bring disturbances.

In terms of allocation, on one hand, continue to value the long-term trend of the AI industry; on the other hand, balance allocations in consumer, pharmaceutical, and real estate chain sectors where valuations are at low levels; simultaneously bullish on the allocation value of strategic resource products such as non-ferrous metals and coal.

Bank of China Fund recommends adopting a balanced approach, focusing on structural opportunities in cyclicals, dividend, and technology growth. Under the Federal Reserve rate hike environment, high-valuation sectors face pressure, while assets with solid earnings and high dividends highlight their defensive value. Focus on three main lines: computing power and semiconductor hardware with profit realization capability; upstream resources with price increases such as coal and non-ferrous metals; and high-dividend banking, insurance, and other non-bank financial sectors.

Golden Eagle Fund judges that A-shares will most likely maintain a consolidation pattern, and the sustainability of the post-holiday recovery depends on the strength of capital return and third-quarter earnings realization. The AI sector has recovery opportunities after adjustment, but needs verification from orders, capital expenditure, and profit data; innovative drugs, power grids, and some new energy sub-sectors can be watched for recovery opportunities brought by independent prosperity, while high-dividend low-valuation assets are suitable as portfolio 'ballast.'

Only when trading volume recovery and earnings realization resonate will the market expand; otherwise, the market will continue its stock-game rotation characteristics.

Ping An Fund proposed that AI technology remains the most certain sector in the fourth quarter, with the semiconductor prosperity cycle continuing upward; traditional real estate, consumer, and other sectors have weak prosperity, but there are variables at the liquidity and policy levels, and preparations must be made to guard against sudden style switches.