Great year for JPMorgan Chinese – for the year ended 30th September 2019, and in volatile market conditions, JPMorgan Chinese achieved a 16.0% total return on net assets and a 19.4% return to shareholders. This compares to the return of 1.7% for its benchmark index, MSCI China.
The enhanced dividend initiative announced earlier this month is designed to help narrow the trust’s discount. This year’s dividend is 2.5p.
Extract from the manager’s report
“Stock selection in the Information Technology and Health Care sectors contributed the most. Within the hardware sector, China’s leading producer of mobile phone camera modules and lenses Sunny Optical is our preferred hardware name and was among our top contributors, as was smartphone supplier Luxshare Precision; both companies benefitted from product upgrades and their own market share gains. Meanwhile, leading network security provider Venustech performed strongly on the back of structural growth demand in China’s cybersecurity market. Within Health Care, a broad number of stocks we own delivered solid results and added value, amidst positive industry growth for the sector. Jiangsu Hengrui Medicine, Hangzhou Tigermed, and Aier Eye Hospital Group were among the leading contributors.
Stock selection in Financials was another key source of strength. Our long-term core positions in China’s biggest insurer Ping An Insurance and one of its largest lenders China Merchants Bank (CMB) continued to be top contributors both in their sector and in our portfolio overall. Ping An’s profits rose thanks to higher investment returns and banking income and we remain upbeat on its prospects following recent meetings with its management. In the case of CMB, it has recently established a wealth management subsidiary and overcame a competitive marketplace and still-weakened credit demand to increase both its net income and net profits. Meanwhile, just as last year, we remain on the side lines when it comes to index-heavy, large cap banks, where we feel challenges may still lie ahead.
Our stock picks in the Consumer Discretionary and Consumer Staples sectors also contributed positively. Premium liquor brand Kweichow Moutai climbed on strong earnings, benefitting from increasing consumer demand for premium brands. China’s sportswear powerhouse ANTA Sports also did well. The company has been one of the best growth stories in China in recent years and its strong performance this year stems from positive industry news flow, store efficiency improvements plus market confidence in its multi-brand strategy that covers a wide market segment. Social e-commerce platform Pinduoduo also contributed. The company has achieved a rapid rise to prominence in its relatively short life, delivering strong growth in revenue, user numbers and underlying spend per user. Pinduoduo stood up well in the face of fierce competition from its larger e-commerce rivals, such as Alibaba (which remains one of our preferred stocks).
Within Industrials, our overweight position in residential property management service provider Country Garden Services helped overall performance. The stock’s price rose over the year on strong earnings growth from its core property management service as well as its proven track record on mergers and acquisitions that provide the launch pad for the business’s ongoing expansion. Shanghai International Airport also performed strongly, riding high on increasing numbers of Chinese outbound travellers and their duty-free product spending habits.
On the other hand, our stock selection in Communication Services detracted. Internet names iQiyi and Weibo were among the weakest performers, both dropping over 30% over the year. Both companies were negatively impacted by general weakness in the advertising market and tighter regulatory control. China’s largest outdoor advertising media operator Focus Media’s results disappointed, due to the combined impact of slowing momentum in the advertising marketplace and higher operational costs. Despite the underperformance, we retain our positive outlook for the stock. For the aforementioned internet names, we believe that video subscription and social media platform services provide a structural growth opportunity, with both iQiyi and Weibo increasing investment in original content.”
JMC : Great year for JPMorgan Chinese