With the completion of the disclosure of the A-share semi annual report for 2025, promoting the progress of medium and long-term fund entry reform has become a focus of market attention. In the first half of this year, medium and long-term funds such as insurance funds and foreign investment injected "fresh water" into the market, helping to form a market ecology of "long-term investment". In addition, since the beginning of this year, the number of newly established equity public funds has significantly increased, exceeding 70% of index funds. The "ballast stone" effect of medium and long-term funds is prominent. In January of this year, six departments including the Central Financial Office, the China Securities Regulatory Commission, and the Ministry of Finance jointly issued the "Implementation Plan for Promoting the Market Entry of Medium - and Long Term Funds", focusing on guiding five major categories of medium - and long-term funds, including commercial insurance funds and the National Social Security Fund, to increase the proportion of equity investment. By establishing a long-term assessment mechanism, the proportion and stability of long-term fund investment in A-shares will be improved. In July, the Ministry of Finance issued a notice on guiding long-term stable investment of insurance funds and further strengthening the long-term assessment of state-owned commercial insurance companies, promoting the comprehensive establishment of a long-term assessment mechanism for insurance funds for more than three years. According to data from the State Administration for Financial Regulation, as of the end of the second quarter of this year, the book balance of stocks held by insurance companies was 3.07 trillion yuan, an increase of 640.613 billion yuan or 26.38% compared to the end of last year. Li Xiao, Deputy Director of the Capital Market Regulation and Reform Research Center at the Central University of Finance and Economics, told reporters that as a typical long-term institutional investor, the equity investment behavior of insurance funds is closely related to macroeconomic, policy environment, income demand, and industry fundamentals. There are three core driving factors for insurance funds to increase their holdings in the stock market in the first half of the year: firstly, the strengthening of macroeconomic recovery expectations, gradual recovery of corporate profits, and the implementation of policy measures such as "activating the capital market" and "stabilizing growth" have improved the market's expectations for long-term returns on equity assets; Secondly, the decline in risk-free interest rates has put pressure on the returns of fixed income assets, and the high-yield elasticity of the equity market has become an important direction for optimizing asset allocation of insurance funds; The third is that policies encourage long-term capital to invest in equity, and policy dividends provide institutional guarantees for insurance funds to allocate equity assets. According to data from Wind Information, as of the end of the second quarter of this year, there were 734 heavily held circulating stocks in insurance companies, with a total market value of 1.57 trillion yuan. In the first half of this year, they increased their holdings in multiple industries such as construction, optional consumer retail, paper and packaging, transportation, and steel, with a market value growth rate of over 30%. Li Xiao stated that from the perspective of the insurance fund increasing industry, there are mainly two main lines of increasing holdings: one is pro cyclical assets, which are highly related to economic recovery, such as construction, steel, machinery, transportation and other industries, which are typical pro cyclical fields; The second is clear policy support for assets with long-term growth logic, such as optional consumer retail benefiting from the "expanding domestic demand" strategy. The scale and proportion of equity funds have steadily increased due to the growth of index funds. In January of this year, the China Securities Regulatory Commission issued the "Action Plan for Promoting the High Quality Development of Index based Investment in the Capital Market", which significantly increased the scale and proportion of index based investment in the capital market; In May, the China Securities Regulatory Commission issued the "Action Plan for Promoting the High Quality Development of Public Funds", optimizing the fee model for actively managing equity funds and improving the scale and stability of equity investment in public funds. Since the beginning of this year, the number of newly established equity funds has significantly increased. According to Wind Information data, as of September 2nd this year, 719 equity funds have been newly established (based on the date of fund establishment), a year-on-year increase of 50.1%, with a total issuance scale of 353.636 billion yuan, a year-on-year increase of 173.12%. Among them, there were 535 index funds, accounting for 74.41%, a year-on-year increase of 106.56%; The issuance scale of index funds was 267.484 billion yuan, accounting for 75.64%, a year-on-year increase of 270.77%. Meanwhile, since the beginning of this year, the scale of index funds has experienced explosive growth. According to Wind Information data, as of September 2nd, the number of stock ETFs reached 1020, an increase of 188 or 22.6% from the end of last year, with a total size of 3.53 trillion yuan, an increase of 644.886 billion yuan or 22.33% from the end of last year. Li Xiao stated that the explosive growth of index funds since the beginning of this year is the result of multiple factors resonating, reflecting profound changes in market ecology, investor structure, and product innovation, which is of great significance to the development of the capital market. With the increasing proportion of institutional investors in the A-share market, the improvement of information disclosure systems, and the continuous improvement of market pricing efficiency, the difficulty of actively managed funds obtaining excess returns through stock selection or timing has increased. In contrast, index funds aim to track market or industry indices with low fees and high transparency, making them a better choice for investors to obtain average market returns. The proportion of institutional investors such as insurance, foreign investment, and bank wealth management subsidiaries has increased, and their investment goals are becoming more long-term and standardized, tending to quickly allocate to a certain market or industry through index funds. Foreign investment continues to increase its layout based on the valuation repair brought about by technological innovation. In the first half of this year, foreign investment increased its layout of A-share assets. According to UBS Securities' calculations, as of the end of June 2025, overseas investors holding A-shares will reach 3.07 trillion yuan. According to data from Wind Information, in the first half of this year, the market value of foreign holdings through the Land Stock Connect (i.e. Northbound Funds) increased by 87.358 billion yuan; Qualified overseas investors hold 1146 outstanding shares, an increase of 47.3% from the end of last year, with a market value of 143.466 billion yuan, an increase of 22.58% from the end of last year. However, it is worth noting that unlike the almost one-sided net inflow of various industries in the south, there is a significant differentiation in the net inflow of funds by industry in the north. ”Meng Lei, China stock strategy analyst at UBS Securities, stated that due to the emergence of the domestic language model DeepSeek and the widespread attention it has attracted to humanoid robots, the information technology and industrial sectors have received extensive attention from northbound funds in both the first and second quarters. Looking ahead, Canadian wholly-owned public fund company Manulife Fund stated that in a liquidity driven environment, it is expected that domestic equity assets such as A-shares and Hong Kong stocks will perform better overall than overseas markets; In the medium term, it is expected that the Federal Reserve's interest rate cut cycle will further deepen. The weakening of the US dollar is expected to drive global capital rebalancing, with a significant increase in demand for foreign investment returning to A-shares and Hong Kong stocks; In the long run, the world has entered a stage of leverage and deficit restructuring, with macroeconomic volatility rising and structural opportunities highlighted. In the medium to long term, we are optimistic about the weakening of the US dollar, major resource commodities (including gold), and domestic equity assets. (New Society)