China is the world’s second largest economy and growth forecasts continue to be high even with short-term challenges posed by COVID-19. More importantly, the growth drivers are broad-based as the world’s largest population matures, urbanises, embraces technology and e-commerce. China is a leader in the green economy and state support has encouraged the development of entire supply chains related to electric cars, solar power and wind turbines. There is also a focus on import substitution for technology goods in response to actions by the US and others to limit access to microchips and high-tech components, All of these provide a material tailwind for domestic companies. Additionally, Chinese equities have low correlation with developed and other emerging markets. Global investors can capture the benefit of diversification by making a dedicated allocation to Chinese equities.
Large market dominated by local retail investors
The Chinese equity market is very large – second only to the US – with over 4 000 listed companies including some of the world’s largest, most innovative and fastest growing companies. However, the market only really opened to foreigners with the creation of the StockConnect programme in 2014. Foreign ownership of local equities remains very low, at around 5%. Instead, the market is dominated by poorly-informed local retail investors. This creates opportunities for carefully-selected, skillful managers.
Multi-manager approach essential
Chinese fund managers tend to specialise by sector or region. They have a private equity mindset and portfolios tend to be concentrated in a few companies, which they know extremely well. This may provide good returns over the long-term, but performance can be volatile. Adopting a multi-manager approach mitigates this by including managers with different specialisations, thereby unlocking the opportunity and delivering portfolio returns at much lower levels of volatility.
Orient Opportunities China Fund
A multi-manager solution that aims to maximise capital growth by investing directly or indirectly into Chinese equities and equity-related securities.
Universe: Listed China Equity
Benchmark: 65% MSCI China A Index + 35% MSCI China Index
Base Currency: USD
Fund Type: Qualifying Investor AIF
Available to qualified and institutional investors. Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CISs are traded at the ruling price and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions is available on request from the Manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance has been calculated using net NAV to NAV numbers with income reinvested. There is no guarantee in respect of capital or returns in a portfolio.
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The case for China
Contact us about China equities