Fund of the week: The brightest gem in the Bric crown

Last year, China remained “the brightest gem in the crumbling crown of the Brics” (Brazil, Russia, India and China) at a time when other emerging markets were hit by fears of a slowdown in US money-printing, says Kate Morley in the Investors Chronicle.

Despite concerns of a hard landing, the emerging superpower turned in a decent performance in 2013, with UK actively managed China funds delivering an average total return of 18.39%.

Far from having missed the boat, “now is an interesting time” for investors to buy China-focused funds, says Morley. Better economic data, coupled with a delay in the tapering of US quantitative easing, saw Chinese equities bounce back in the third quarter of last year.

And while the taper is once again rattling investors in emerging markets, upcoming market reforms could mean stocks continue to do well. One way to get exposure is through the JP Morgan Chinese Investment Trust (LSE: JMC), which is run by Howard Wang.

JP Morgan Chinese IT plcThe trust has delivered a 99% return over five years, although its three-year performance is less impressive, down 7.59%. It is currently trading at an 8.2% discount, compared to an average discount of 7.6% since 2010.

The objective is to deliver long-term capital growth by investing in ‘Greater China’ equities – firms based in China, Hong Kong and Taiwan. Currently 56% of the trust’s holdings are in China, 22% are in Taiwan and 19.6% are in Hong Kong equities.

In terms of sectors, around 38% is invested in financials, while 23% is in IT-related stocks – Wang says Chinese iPhone sales have soared, indicating strong consumer demand. Overall, he believes Chinese fundamentals remain strong, while valuations are still low.

JP Morgan Chinese Invest top ten holdings
Name of holding % of assets
Taiwan Semiconductor 6.6
Tencent 5.4
China Construction Bank 5.0
AIA 4.6
JF China New Generation Fund 4.2
Ind & Comm’l Bank of China 3.8
CNOOC 3.2
Galaxy Entertainment Group 2.4
Hutchison Whampoa 2.2
Cheung Kong 2.1

 

Merryn

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