SJB | Korschenbroich, 07.03.2022.
Die Aktienmärkte in China setzten im Januar ihre positive Kursentwicklung fort, entwickelten sich klar besser als globale Aktien und legten um 11,0 Prozent zu. Zur freundlichen Marktstimmung trugen das Ende der chinesischen No-Covid-Politik und der damit verbesserte Wirtschaftsausblick bei. In diesem unterstützenden Marktumfeld generierte der New Capital China Equity Fund USD I Acc (WKN A1J3EX, ISIN IE00B8BP6F62) eine positive Wertentwicklung von +10,1 Prozent im Monatsverlauf, wobei Sunresin New Materials, Pinduoduo and China Merchants Bank zu den größten Outperformern gehörten. In ihrem Monatsbericht für Januar analysiert FondsManagerin Daisy Li die jüngsten Marktbewegungen und berichtet für Investoren der SJB FondsStrategie Surplus über die aktuelle Portfoliostruktur ihres China-Fonds.
Monthly Market Review
Key events in market
The China market extended the rebound by 11% in January, outperforming global markets, thanks to the faster-than-expected peaking of Covid and shorter-than expected Covid disruptions on economic activities, after the sharp reversal of Zero Covid policy in November – December. By Chinese New Year in mid-to-late January, activities in major cities are mostly back to normal. Traveling and consumption during Chinese New Year are slightly ahead of expectations.
Key performance & positioning updates
The Portfolio underperformed the benchmark (MSCI China All Shares Index) during January by ~1%. The underperformance is mainly due to the extension of historical performance divergence of Hong Kong/ADRs (up by ~10%) versus A shares (up by midsingle digits), and the structural overweight the portfolio holds in A shares as we find more long-term structural opportunities in the market.
Market Update
Driven by sharp reversal of the three major factors dragging the 2022 China market in November to December, namely Zero Covid policy, property and geopolitics, coupled with the faster-than-expected peaking of Covid and shorter-than-expected Covid disruptions on economic activities, the China market extended the rebound by 11% in January.
Covid policy officially entered full reopening in December, with policies leaning towards a quick herd immunity with a target of back-to-normal as soon as possible. While official data cannot show the status of Covid spread in the Mainland, we can tell the impact from the quick and sharp contraction of trading volume in the onshore Ashare market. From the beginning of December to mid-December, the daily trading value of A-share markets quickly contracted by ~50%, from >Rmb1trillion per day to Rmb500-600bn, as a large number of market participants were sick at home. Trading volume recovered in January as we moved closer to Chinese New Year, indicating that Covid is peaking. During Chinese New Year, we observed traveling and consumption activities slightly ahead of expectations and economic activities in most cities are back to normal, which is earlier than the original expectation of back-to-normal by end of 1Q22. Therefore, expectation for China GDP growth is revised up to ~5% for 2023.
Fund Performance & Positioning
The Portfolio underperformed the benchmark (MSCI China All Shares Index) during January by ~1%. The underperformance is mainly due to the extension of historical performance divergence of Hong Kong/ADRs (up by ~10%) versus A shares (up by midsingle digits), and the structural overweight the portfolio holds in A shares as we find more long-term structural opportunities in the market. Our top alpha contributors of the month were Sunresin New Materials, Pinduoduo and China Merchants Bank. Our key detractors of the month were the A-shares holdings. We expect relative performance convergence of A-shares and Hong Kong/ADRs when the key financial hubs in Mainland China reach herd immunity and onshore trading value rebounds. Meanwhile, we have updated our risk management practices to narrow market factor exposure in the future.
Outlook
China reopening is now confirmed, with the timing earlier than the market anticipated. We estimate underlying economic growth can recover from ~2% to ~5%, with normalization of economic activities and recovery of consumer and business sentiment. Key investment opportunities we have identified are: 1) consumption and internet, seeing the largest sequential recovery for the Chinese economy; 2) new energy like solar and offshore wind, which is on track to deliver strong volume growth, though we are relatively conservative on electric vehicles (EV) due to already high penetration and demand uncertainties in both China and the US.
