Following the Lunar New Year, the stock market has witnessed remarkable performances from certain individual stocks, particularly in sectors like DeepSeek concepts and robotics, as well as the film industryThis surge in specific stocks has led to a notable rise in various sub-sectors, such as media, software, and cloud computingConsequently, several industry-specific ETFs (exchange-traded funds) have dramatically outperformed the market, with gains exceeding 20% in areas like gaming, trusted innovation, film, and cloud computing since the holiday season.

In sharp contrast, more diversified broad-based ETFs have faced significant capital withdrawalData up to February 13 reveals that since February 5, both the Huaxia Sci-tech 50 ETF and the E Fund Sci-tech 50 ETF have seen reductions of over 5 billion and 2.5 billion units respectivelySimilarly, the Guotai Junan CSI A500 ETF decreased by more than 1.5 billion units, while the Huatai-PB CSI 300 ETF saw its holdings dip by over 800 million unitsIn stark contrast, theme-based ETFs like those focusing on photovoltaics, securities firms, AI, and robotics recorded substantial increases in share volumes.

Industry insiders argue that increased attention on niche sectors indicates a rising short-term risk appetite among investors and boosts recognition of the relevant industriesHowever, this short-term enthusiasm can be highly susceptible to fluctuations in market sentiment.

Focus on Industry Themes

The frenzy around individual stocks shows no signs of abatingAs of the close on February 14, notable stocks such as Light Chasing Media, Parallel Technology, Qingyun Technology-U, Yoke Data-W, Yunchuang Data, Dream Network Technology, Hangang Co., and Interactive Daily have all registered gains exceeding 100% since February 5.

Among these, the continual box office success of "Nezha 2" has propelled its significant investors, particularly Light Chasing Media, to staggering heights

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This stock has been on a bull run, enjoying over a 260% increase since the new year, drawing widespread market attentionThe success of "Nezha 2" has also sparked a massive uptick in the film and media sector, with the Huaxia Gaming ETF boasting an increase of over 30% since the holidays, making it the top performer among stock-type ETFs, while numerous ETFs specifically targeting gaming, trusted innovation, and film have similarly surged.

Beyond media stocks, the rise of the DeepSeek large model has stimulated significant gains in DeepSeek-related and robotics stocks, with many of these stocks doubling in value after the holidayIncreased interest and investments in these thriving sectors, however, contrast sharply with the sliding values of several large-cap broad-based ETFs.

According to Wind, as of February 13, since February 5, the disparity in share movements between broad-based ETFs and theme-based ETFs is starkShares in ETFs focused on photovoltaics, securities, AI, robotics, software, and power have all increased by over 5 billion units, while the Huaxia and Huatai-PB Sci-tech 50 ETFs saw decreases of 5.778 billion and 2.556 billion units respectively; the Guotai Junan CSI A500 ETF reduced by over 1.5 billion, along with a reduction exceeding 800 million units in both the Huatai-PB CSI 300 ETF and the Hua’an Growth Enterprise Market 50 ETF.

Some mainstream broad-based ETFs have experienced significant single-day outflows; on February 13, for example, the Huatai-PB CSI 300 ETF saw a net outflow of 1.319 billion yuan, while the E Fund Growth Enterprise Market ETF's net outflow was 844 million yuan, and the Huaxia Shanghai Composite 50 ETF had an outflow of 767 million yuanConversely, the Huaxia Semiconductor ETF, Guolian'an Semiconductor ETF, and E Fund AI ETF all gained over 300 million yuan on the same day.

Rising Short-Term Risk Appetite

Last year was characterized by market volatility, with many broad-based ETF portfolios attracting capital as their popularity soared

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Yet, in light of the recent profitable trends, the tides are shifting again, with more elastic industry-themed ETFs drawing increased investment by comparative measures.

According to Sun Enxiang, the head of wealth management at Paipai Network, the shifts in capital flow indicate a growing preference for betting on thematic investments. “This highlights not only the market’s interest in trending sectors but also reflects structural changes in capital flows,” he elaborated.

Why thematic investments? Sun explained that there are two primary contributing factorsFirst, there is increasing market confidence in the future of certain fields, especially with the backing of favorable policies and technological innovation, which boosts recognition of their long-term investment valueSecond, this momentum signifies a shift in investor confidence and risk tolerance, pushing investors toward embarking on higher-risk pursuits in an effort to achieve greater returns.

Mo Xiaocheng, the general manager of Huanrui Tianze, noted that the growing selective interest of investors in industry themes is evident. “This not only reflects the market’s enthusiasm for popular sectors but also indicates a structural change in capital distribution,” he said.

Mo further pointed out that the market is transitioning from a bear phase to a bull phaseIn the short term, certain trending industries are likely to attract substantial inflows due to their high growth potential and policy supportThese industries may indeed perform better in the short term.

However, these short-term fads may not be suitable for long-term value investors.

According to Mo, while quick gains from fads and speculative stocks can be compelling, historical patterns suggest these often lack durability and stability, making them prone to volatility, which may lead to unsustainable profits.

Thus, he articulated that long-term value investors are inclined to strategically position in financially sound companies at lower price points. “Instead of chasing fleeting trends, we focus on discovering companies that have long-term growth potential through in-depth research, and we remain committed to holding these investments for sustainable returns,” he concluded.

Recently, certain sectors' performance has significantly outshone broader indices, spurring renewed discussions regarding the choice between actively managed funds and passive index funds.

According to Sun Enxiang, actively managed equity funds may currently offer better value. “On one hand, active funds can swiftly adapt to market shifts and seize structural opportunities; on the other, they seek to maximize excess returns through selective stock picks and timely operations,” he asserted.

However, Sun cautioned that in the event of a broad bullish trend, the difficulty of generating excess returns through active management would substantially increase, making index funds relatively more favorable.

Conversely, Han Wei, managing director of Tai Shi Investment, contended that index funds still provide superior value. “For one, in the past year, most index funds have seen their fees drop to levels close to international standards, whereas active funds have higher fees

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