China’s A-share the opportunity for investors
It has been a year since the first emerge of coronavirus in Wuhan, China and people’s lives all over the world have been changed literally overnight and forever. City lockdown policy, public health, and social measures have been released to contain the virus from every country. Today, the number of infected coronavirus cases and deaths continues to increase even though vaccines against the virus are available in many countries.
Everywhere excepts China. China as the world’s center of the pandemic has recently reported its strong GDP growth in two years which indicates rapid recovery from the outbreak. The growth is beating major world’s economy such as USA, EU or even Japan. Thanks to the Government’s rapid lockdown response and economic stimulation policies which efficiently controlling the pandemic after the virus has been detected. Today, most Chinese cities have returned to normal with schools and offices reopened.
One of the key drivers of China’s economic rebound is its domestic consumers. With high domestic consumptions and the private sector as Xi’s “dual-circulation model”, China is growing without relying on international trade or external circulation. Other countries that rely on international trade and tourism negatively impact and recovering in slower paces. China’s economy is projected to be the world number one within 8 years from now with an average growth of 4.5-5.7%, supported by continuous consumption in the country.
(source: Centre for Economics and Business Research (CEBR) Annual report 2020)
Investors might be aware of the USA and China Tech war or in other words, the technology war. These two countries have already been in a tech war with each other. The United States, the world’s leader of high technology and innovation hub is now trying its best not to be overtaken by its rival.
On the other hand, China as the world’s biggest technology production base has transformed into a global technology leader. As well as, having technology personnel that being able to continuously conduct technology research and development which makes it seems like China's technology is about to overtake the United States. In China Standards 2035 plan, the country plans to transform China into the world’s number one tech innovator and producer by 2035.
Whether old or new economy, China is considered as one of the top economies with continuous growth. Thus, it is not surprising that we have seen investors around the world adjusting the weight of investment in China’s A-Share in the MSCI EM Index which increased from 4.8% to 20.8%.
(source: Guide to the Market Asia 1Q2021, 31 Dec 2020)
For an investor who is interested in China, Principal Asset Management wishes to propose “Principal China Equity Fund A (PRINCIPAL CHEQ-A)” which will diversify investment to the old and new economy by investing in UBS (Lux) China A Opportunity Fund as core portfolio in the proportion of 70% of net asset value. UBS (Lux) China A Opportunity Fund invests principally in high-growth Chinese companies that trade in China’s A-share. The fund is guaranteed 5 stars by Morningstar. (as of Dec 2020)
Additionally, the fund will invest or hold investment units in Exchange Traded Fund (ETF) as a satellite portfolio that has the policy to invest in equity instruments of companies registered in China. For example, iShare FTSE A50 China Index, Principal China Direct Opportunity Equity, Premia CSI CAIXIN China New Economy ETF (3173 HK), and Global China Cloud Computing ETF. The investment portions between the core portfolio and satellite portfolio will be according to the discretion of the fund manager.
Example of the ETF’s holdings are as following;
Gree Electric Appliances, Inc. of Zhuhai, a Chinese and the world’s major appliances manufacturer and the world largest air-conditioner manufacturer. The company manufactures 60 million air-conditioner annually with production bases worldwide e.g. China, Pakistan, Vietnam and etc.
(Source: global.gree.com, data as of 30 sept 2020)
Meituan-Dianping is a Chinese application developer company. Its application connects consumers with local businesses for food takeout, hotel bookings, and movie tickets and other 200 services. They currently have over 600 million subscribers and more than 5 million service providers on their platform. Their current market value is more than USD 200,000 million which is 3 times Uber’s market share size. (Source: about.meituan.com/en and Yahoo Finance, data as of 30 Sep 2020)
Hundsun Technologies Inc., is a China-based fintech company engaged in in the provision of software products and services and financial data for financial institutions which offers high growth potential.
(Source: https://es.linkedin.com/company/hundsunayers)
For inquiry and additional Information of “Principal China Equity Fund A (PRINCIPAL CHEQ-A)”: https://www.principal.th/en/principal/CHEQ-A
Please visit here or contact CIMB Thai for fund factsheet and fund prospectus or our Client Service at (662) 686 9595.
For more information https://www.principal.th/en/mutual-fundth
Disclaimer:
• Master fund has highly concentrated investment in China. So, investors have to diversify investment for their portfolios
• Investing in Investment Units is not a deposit and there is a risk of investment, Investors may receive more or less return investment than
• the initial investment. Therefore, investors should invest in this fund when seeing that investing in this fund suitable for investment
• objectives of investors and investors accept the risk that may arise from the investment.
• In an unusual situation unitholders may not be able to redeem the investment units or may receive the redemption money later than the
• period that specified in the prospectus.
• Investors should study the information in the prospectus to understand and should keep the prospectus as information for future
• reference and when in doubt, please contact the selling agent before investing.
• Investors should understand product characteristics (mutual funds), conditions of return and risk before making an investment decision.
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