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The Asia funds still going big on China

  • Various fund managers left China last year
  • We still see people focusing on problem areas

From political power struggles to repeated lockdowns to last year’s regulatory blitz, the challenges in the Chinese market are so great that even some die-hard fans are on the fence.of Scottish Mortgage (SMT) The team, a long-time fan of innovative Chinese companies, has recently highlighted that it has cut several Chinese holdings, including those of the internet giant. Alibaba (HK:9988)“China’s regulatory environment remains challenging, and we are concerned that continued uncertainty will undermine the risk-tolerant culture that has fueled the long-term success of China’s private sector,” they said. pointed out.

Those looking to buy China’s plunge certainly had their own problems in the short term.of KraneShares CSI China Internet UCITS ETF (KWBP)has raised a significant amount of money from investors in 2021, but is down 36% in the year to November 17. Looking at other China-only funds, JP Morgan China Growth & Income (JCGI) About 40% less over the same period.

Therefore, investors may want to access Asian markets without China. Recent featuresOptions range from China Light Funds such as Pacific Assets (PAC) It also includes recently launched non-China emerging market ETFs and even other country-focused portfolios such as India and Vietnam. Similarly, some Asian and emerging market funds have pivoted from China to other markets such as India over the past year or so. But avoiding China is still very important, and contrarians may look to portfolios that are still heavily invested in the market.

still have money China

Asian and emerging market funds with high exposure to China depend on how well known they are to investors. Starting with a fund that may be lesser known, T Rowe Price Asia Opportunity Equity (GB00BF0S8S26) We still have plenty of weight in China, which represented 35.4% of our portfolio at the end of October. The fund is owned by Tencent, Alibaba, Yum China (USA: YUMC) And the darling of Scottish mortgages Meituan (HK:3690) It’s in the top 10 owned. Investment team takes a bottom-up approach, uses analytics to achieve market leadership, features profit-focused capital allocation, and is run by a strong management team focused on shareholder value Find companies that are The fund also includes a sustainability overlay.

Portfolio manager Jihong Min used a comment at the end of October to reiterate his reasons for sticking with China. “Although recent political events in China have increased uncertainty about its policy direction, we believe that economic development and income growth remain key goals for the ruling Communist Party. , we are interested in several companies with significant exposure to the domestic economy,” he said.. At the time, the Fund’s largest sector overweight position was in the financial sector.

When it comes to larger, more widely held funds, some will either keep their China allocations in line with their benchmarks or be slightly larger in the market.take the big one Federated Hermes Asia ex Japan Equity Fund (IE00BRHY9X99)its investment managers tend to favor companies that are not favored now but could have better times in the future. including Chinese companies JD.com (HK:9618), Baidu (HK:9888) Alibaba ranks among the top 10 even with relatively small position sizes. Portfolio his manager Jonathan Pines said in August that he was a contrarian buying in Chinese stocks. Things are not so clear today. The plunge in Chinese stocks provided an excellent opportunity to buy higher quality stocks at bargain prices. Since then, Chinese stocks have indeed fallen again, but their contrarian tendencies may be attractive to some investors.

Elsewhere, some prominent Asian equity investors still have decent exposure even though they have exited in recent years. Baillie Gifford Pacific (GB0006063126) At the end of October it had a quota of 30.9%, Pacific Horizon Trust (PHI) Asset managers run by the same asset manager have seen lower levels of exposure after recently leaving China.of Asian Dragon Trust (DGN) As of the end of September, managed by Abrdn, China had 33% of its quota, reiterating that the team is focusing on themes such as domestic consumption, technology and green energy, adding: To us, given the rapid turnaround from growth stocks. ”

Some funds that have been getting a lot of attention lately are focused on China for now. Aubrey Global Emerging Markets Opportunity (LU1391034839), a focused fund that seeks companies “fully focused on growth in consumption and services,” had a 33.6% allocation to China at the end of September. However, comments issued at the time by the investment manager pointed to serious concerns about challenges in the Chinese market. The team noted that eight of the 10 worst performing stocks in September were in China, adding that “the news in China hasn’t improved.”

“Our resolutions on China are being tested very hard,” they said. “What I can tell you about our holdings is that even with some cautiously lower expectations, they weren’t cheap,” he said.

Stock price movements can change over time, but the composition of the Asia and Emerging Markets indices suggests that these region-focused trackers still tend to have significant exposure to China. also means. iShares Core MSCI EM IMI UCITS ETF (EMIM) As of November 18, its feature in the Top 50 ETF list had 27.1% weight in China, but other regions are becoming increasingly prominent. India makes up about 16% of the fund, Taiwan 15% and South Korea 12% of his.

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