China’s top-performing mutual fund is positioning for a recovery in onshore equities, with artificial intelligence stocks as its main bet.

“The onshore market is trading in a triple bottom, with the worst over in terms of polices, earnings and valuations, with relatively little downside risk,” the Soochow Mobile Internet Flexible Allocation Mixed Fund said in a first-half filing. It plans to maintain a high exposure to stocks versus cash for the rest of the year.

The fund’s top holdings as of the end of the first half included electronics supplier Luxshare Precision Industry Co., auto components maker Huizhou Desay Sv Automotive Co., and Will Semiconductor Co. The vehicle also increased its exposure to Iflytek Co. and Suzhou TFC Optical Communication Co. in the three months ended June.

Investors are debating if Chinese equities have hit a bottom as signs of further policy support and the end of a crackdown on the tech sector fuel hopes of a recovery. Global funds bought the most local shares since January on Thursday, in a possible sign that the tide may be turning for the market.

The Soochow Mobile fund delivered a 75% return this year, a performance that helped it beat over 2,000 other vehicles, according to East Money Information Co., a fund tracker. In comparison, the CSI 300 Index has climbed less than 1% since end-December.

Managers of the Soochow Mobile fund, which oversees the equivalent of $38 million, are of the view that the onshore stock market will enter a “tech era” in the next three to five years. AI and the policy drive for a digital economy will fuel a new growth engine, they said.

The fund remains upbeat on semiconductors for the next six months, on expectations that fundamentals will improve. “ChatGPT applications may bring about smarter hardware, and spur a cycle of replacements in consumer devices,” according to the filing.

--With assistance from Mengchen Lu.