JPMorgan Chinese has published results for the year ended 30 September 2015 that show that discount widening resulted in a -7% return to shareholders despite the NAV return coming in at -0.2%, very close to the performance of the MSCI Golden Dragon Index of 0.0%. There is a dividend of 1.8p up from 1.6p last year.
The Board is proposing that the benchmark be changed to the MSCI China Index to reflect the greater availability of stocks to purchase in mainland China than when the fund was launched. They also want to amend the investment policy to allow greater investment in China A shares.
The manager’s report says that, over the reporting period, JPMorgan Chinese’s overweight position in the financial sector, in names such as Ping An (insurance), China Merchants Bank (mid-sized bank) and China Vanke (property), contributed to returns as stocks rallied over this period on the back of a supportive liquidity environment. Technology stock picks also helped performance. Overweight positions in component providers AAC Technologies and Catcher Technology worked well as they are leveraged to the Apple food chain and geared to capture market share and new revenue opportunities through the new-generation iPhones. Positive contribution also came from a variety of secular growth names across healthcare (Sino Biopharmaceutical), internet (Tencent), environmental related play (Zhengzhou Yutong Bus) and consumption (Spring Airlines).
On the negative side, the casino operators sold off sharply over this period on weak gaming revenue growth, pressured by ongoing anti-corruption clampdowns, renewed concerns over capital flow restrictions and the latest junket scandal. The collapse in the energy complex hurt companies such as Sinopec Oilfield Service and China Petroleum & Chemical, whereoverweight positions detracted from returns. Lackluster global growth also negatively impacted several companies in the materials sector, such as Angang Steel and China Steel Chemical, with weak demand weighing on earnings. Additionally, the overall underweight exposure in China Mobile hurt relative returns, as the stock’s defensive earnings stream held up better than peers. The recent top-level leadership reshuffle among the largest three telecom operators also drove share price volatility.
JMC : JPMorgan Chinese places greater emphasis on mainland China