CITIC SEC: Fund holdings in the food and beverage sector recovered in Q3; recommends increasing allocation to leading baijiu companies at the industry bottom.

CITIC SEC released a research report stating that in 2026Q3, both the scale and proportion of fund holdings in the food and beverage sector stabilized and rebounded, mainly because after the tech investment rally cooled in Q3, some funds returned to consumer leaders with stabilized fundamentals and attractive dividend returns. By sub-sector, the proportion of baijiu holdings increased most noticeably in Q3, while among mass-market products, dairy product holdings rebounded the most, and essentially all other sub-sectors saw varying degrees of sequential recovery. From an individual stock perspective, baijiu leaders remained the mainstay of fund heavy holdings, with the number of funds heavily holding Kweichow Moutai, Shanxi Xinghuacun Fen Wine Factory, and Anhui Gujing Distillery all increasing, while positions in dairy and restaurant supply leaders remained relatively stable. In terms of investment recommendations, it is advised to increase allocation to leading baijiu companies at the industry bottom; for mass-market products, three main themes are recommended: 1) the dimension of competition improvement; 2) the high-dividend dimension; 3) the dimension of large-health growth prosperity. The main views of CITIC SEC are as follows: Food and beverage fund heavy holdings stabilized and rebounded, but allocation remains at a low level. In 2026Q3, the heavy-holding scale of active equity funds in food and beverage was RMB41.2 billion, +11.4% YoY, with a holding proportion of 2.1%, -2.0/+0.6 ppts YoY/QoQ respectively. The holding proportion of food and beverage stabilized and rebounded after 11 consecutive quarters of decline. The bank believes this was mainly because the earlier clearing of food and beverage funds had been relatively thorough and the was clean; as the tech rally cooled starting in 26Q3, some funds returned to stable/high-dividend assets. Despite the stabilization and rebound in fund heavy holdings, food and beverage overall remains underweight. Baijiu holdings rebounded the most sequentially, while other sectors also received increased allocation. By sub-sector, the proportion of fund holdings in baijiu rebounded the most, mainly because the baijiu industry has gradually bottomed out from the perspectives of wholesale prices, sell-through, and inventory, and baijiu is a large-cap sector whose leading companies have strong operational resilience and whose current dividend yields are attractive, typically making it the first choice for funds returning to the consumer sector. Among mass-market products, dairy products saw a relatively large sequential increase in fund heavy-holding proportion due to raw milk entering an upward cycle and the fundamentals of leading companies expected to improve; other sectors including condiments, frozen food, and non-dairy beverages all saw slight sequential increases in fund holding proportionscondiments and frozen food mainly due to stable operations of leaders and market expectations of price increases by leaders, and non-dairy beverages mainly due to increased market allocation to high-dividend assets. Baijiu leaders remain the mainstay of holdings, while positions in dairy and restaurant supply leaders are stable. From the perspective of individual stocks, baijiu leaders remained at the forefront of heavy-holding market value in 2026Q3, with Kweichow Moutai, Shanxi Xinghuacun Fen Wine Factory, and Anhui Gujing Distillery all receiving increased allocation. In mass-market products, Inner Mongolia Yili Industrial Group, Anjoy Foods Group, Angel Yeast Co.,Ltd., and Foshan Haitian Flavouring and Food maintained relatively high holding levels; although demand in the mass-market products sector came under pressure in 2026Q2 and market confidence weakened, the dairy and restaurant supply chain sectors maintained strong capacity to absorb funds. Risk factors: Downside in consumer prosperity; restaurant recovery falling short of expectations; price increase results falling short of expectations; intensifying industry competition; impact of emerging channels exceeding expectations; continued rise in raw material prices; food safety issues, etc.