Will China funds and trusts continue their winning streak?
by Hannah Smith from interactive investor | 12th March 2021 09:10
Hannah Smith explains why funds and trusts investing exclusively in China are enjoying a strong run of form.
China equity funds and investment trusts have been roaring ahead this year as the country’s economy powers onwards following recovery from the pandemic.
Figures from QuotedData show that the 10 best-performing investment trusts in net asset value terms (NAV) in January included five China and Asia-focused funds. These were JPMorgan China Growth & Income (LSE:JCGI), Baillie Gifford China Growth (LSE:BGCG), Fidelity China Special Situations (LSE:FCSS), Invesco Asia (LSE:IAT) and Pacific Horizon (LSE:PHI), all with NAV returns of 6% to 10%.
Meanwhile, FE Analytics data shows that six China and Asia funds were among the top 10 open-ended fund performers in January, including GAM MultiStock China Evolution, Invesco China Equity, and Guinness Best of Asia, all up around 9% to 12%.
The start-of-the-year data echoes the ongoing trend of China and Asia funds outperforming for some time. Over the year to 31 December 2020, the Investment Association’s China/Greater China sector returned 32.5%, while Asia Pacific ex Japan delivered 19.9%.
So what’s behind this momentum for China and wider Asia, and can it continue?
Economy reopens
Although it was the epicentre of the Covid-19 crisis, China got the virus under control rapidly and has since benefited from the reopening of its economy. It is coming out of the pandemic stronger, and with a “flourishing” domestic equity market, QuotedData says.
“The measures that China took to bring its Covid-19 spread under control left it able to reopen its economy much faster than many other countries,” explains QuotedData’s head of investment trusts, James Carthew. “Its GDP numbers suggest that the economy grew by 2.3% in 2020, while most others were shrinking. That is obviously helpful for Chinese companies, which are also seeing recovering exports.”
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