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General risks: The value of investments, and any income generated from them, can fall as well as rise. Where charges are taken from capital, this may constrain future growth. Past performance is not a reliable indicator of future results. If any currency differs from the investor's home currency, returns may increase or decrease as a result of currency fluctuations. Investment objectives and performance targets may not necessarily be achieved, losses may be made.
Advisor
Latest Insights
We examine the evolution of China’s capital markets and its potential impact on global markets.
Read more to understand the investment opportunity that we believe China offers.
Equity Insights
Latest Insights
Four questions answered on MSCI’s quadrupling of China A-Share inclusion
Five investment themes for the Year of the Pig
Inclusion and transformation in 2019
Michael Power: Money Life Interview
Recent Insights
What's behind the Chinese equity and renminbi sell off?
China: The Second Great Transformation
Citywire Selector: Star Manager Stats – Greg Kuhnert
Corporate governance, advocacy and engagement in China: winds of change
Fixed Income Insights
Latest Insights
China’s onshore bonds – ready for take-off
Five investment themes for the Year of the Pig
Bond ambition: China forges ahead
Michael Power: Money Life Interview
Recent Insights
Will the renminbi rout continue?
China: The Second Great Transformation
Six reasons for investors to allocate to Chinese bonds
The case for Chinese fixed income
China: shifting focus from financial to environmental health
Funds
Read more about our equity and bond funds focused on the growth opportunity in China
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Why invest in China?
Why invest in China?
1. No longer a copycat
China’s increased innovation has the potential to foster more globally competitive companies and drive the economy
Patent applications
Source: WIPO statistics database, December 2018.
2. Attractive valuations
Valuations appear cheap versus developed markets.
12 month forward P/E
Source: Bloomberg, Investec Asset Management, 19.02.19.
3. Investors can no longer ignore this asset class
The inclusion of 20% of China A-shares in MSCI EM index by November 2019 should increase weight to 3%, leading to an estimated US$ 60-100 billion of additional inflows. When A-share inclusion factor reaches 100%, China-A could represent 14.6% of MSCI EM, whilst Aggregate China could represent 41.5%
Source: FactSet, MSCI, Goldman Sachs Global Investment Research.
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Why take an all-China approach?
Why take an all-China approach?
1. A holistic approach to fully accessthe real China market
A holistic approach which includes China A-shares, B-shares, H-shares and ADR for the broadest opportunity set andmaximises exposure to best ideas.
A holistic approach for investing in China
2. Offers a better representation of the Chinese economy
An all-China approach provides a better balance from a sector perspective. The MSCI China Index is heavily skewed towards Consumer Discretionary, Financials and Communication Services, whilst the MSCI All China Index has broader sector exposure and is more representative of the domestic economy.
Sector exposure of MSCI All China and China indices
Source: Bloomberg, CICC Research, 28.02.19.
3. Offers opportunities to benefit from pricing anomalies
Despite the introduction of Stock Connect and other initiatives to increase efficiency, the premium between H-shares and A-shares remains at about 20%-45%. This creates arbitrage opportunities.
A/H dual listing premia
Source: Bloomberg, 19.02.19. This is not a buy, sell or hold recommendation for any particular security.
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All China Equity
Investec GSF All China Equity Fund
Download the All China Equity Spotlight
Read the Citywire Source article
Investment objective:
The Fund aims to provide long-term capital growth primarily through investment in equities or equity-related securities issued by Chinese companies listed anywhere in the world.
Greg Kuhnert
Co-Portfolio Manager
Wenchang Ma
Co-Portfolio Manager
Why invest in all-China equity?
- Opportunity to invest in a dynamic and growing economy, undergoing structural change at very attractive valuations
- Investing in both onshore and offshore Chinese equities doubles the investment universe and maximises the potential of finding interesting investment opportunities
- The All China market is a better representation of the Chinese economy, providing access to unappreciated quality blue chips in the industrial, consumer and healthcare sectors
- Looking through shorter-term volatility, we believe the China A-share market offers attractive longer-term potential
Why 4Factor for Chinese equities?
- Specialist China team based in London and in Hong Kong
- Strong track record of picking stocks in China over the past decade
- We follow a strong, disciplined and tested investment philosophy
- We have grown our Chinese equities under management to US$5.9bn and managed total assets of US$54.5bn as at December 2018
- Our global perspective enhances analysis of Chinese stocks
Fund highlights
- Investment universe: Chinese companies listed anywhere in the world, inclusion of A shares doubles the universe size
- Minimum market cap: US$500m, daily liquidity US$2m, minimum coverage by two analysts
- Portfolio construction: maximum 60 stocks
- Performance target*: 3-5% per annum above MSCI All China Index
*Performance target will not necessarily be achieved, losses may be made.
The above guidelines are internal and subject to change without prior notice.Why the 4Factor process works when investing in China
Specific risks
Geographic / Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Derivatives: The use of derivatives is not intended to increase the overall level of risk. However, the use of derivatives may still lead to large changes in value and includes the potential for large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Concentrated portfolio: The portfolio invests in a relatively small number of individual holdings. This may mean wider fluctuations in value than more broadly invested portfolios.
Investec All China Bond Fund
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Why invest in China?
1. Yield pick-up versus developed market peers
The yields of onshore (CNY) and offshore (CNH) China government bonds are generally higher than those of large global peers
CNH 5yr Govt Bond Yields & CNY Onshore Govt Bond versus DM Govt Bond Yields (%)
Source: JPM, Bloomberg, 28 February 2018. Comprising the JPM GBI Global Index are bonds issued by the governments of Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, Netherlands, Spain, Sweden, United Kingdom and United States of America.
2. Diversification benefits: low correlation versus other asset classes
Allocating to Chinese fixed income can help diversify overall portfolio returns because China’s interest rate movements are predominantly determined by domestic factors
Offshore CNH Bonds Offshore USD China Bonds Global DM Bonds Global DM Equities Global EM Local Bonds Global EM USD Bonds Global EM Equities Onshore CNY Bonds -0.07 -0.22 0.19 -0.22 -0.07 -0.18 0.22 Offshore CNH Bonds 0.47 0.28 0.45 0.43 0.39 0.58 Offshore USD China Bonds 0.29 0.60 0.67 0.81 0.69 Global DM Bonds 0.19 0.56 0.48 0.27 Global DM Equities 0.71 0.65 0.88 Global EM Local Bonds 0.82 0.81 Global EM USD Bonds 0.74
Source: Bloomberg, December 2017. Onshore CNY Bonds: JP Morgan Asia Diversified Broad China Index TR; Offshore CNH Bonds: MarkitiBoxxAsia Local Bond Index China Offshore TR Index Unhedged; Offshore USD China Bonds: JP Morgan Asia Credit Index China TR; Global DM Bonds: JP Morgan Government Bond Index Global Unhedged USD; Global DM Equities: MSCI World Index; Global EM Local Bonds: JP Morgan GBI-EM Global Diversified Composite Unhedged USD; Global EM USD Bonds: JP Morgan EMBI Global Diversified Composite; Global EM Equities: MSCI Emerging Markets Index.
* Correlations calculated based on monthly returns data, from 2008 to 2017.
3. Exposure to the world’s largest emerging bond market
Gain exposure to the world’s largest developing bond market that is under-represented and set to increasingly feature in global fixed income allocations. Bloomberg Barclays announced launch of the Global Aggregate + China Index in March 2017, with China’s projected weight at 5.9%. Citi also included China in its Emerging Markets bond indices in March 2017.
General government total debt securities
Source: Bank for International Settlements (BIS), June 2017
Important information
All information is as at 31.12.18 unless otherwise stated.
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Why take an all-China approach?
Investec All China Bond
Holistic All China Approach
- A holistic approach which includes onshore and offshore Chinese bonds maximises the investment universe to achieve attractive yield and credit quality
- We believe a best-ideas China-centric fixed income strategy can help identify investment opportunities across the market cycle
- A broad investment mandate allows active managers to unlock relative value opportunities that come from market segmentation
“A best-ideas China-centric fixed income strategy that invests across
rates, credit and FX.”Source: Onshore CNY bonds: Bloomberg Barclays China Aggregate; Onshore Panda bonds: Bloomberg; Offshore USD bonds: JPM Asia Credit Index (China, HK, Taiwan, Macau); Offshore CNH bonds: ICE BofAML China Offshore Broad Market. February 2018. IAM calculations.
Important information
All information is as at 31.03.18 unless otherwise stated.
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All China Bond Fund
Investec All China Bond
Investment objective:
The Fund aims to provide income with the opportunity for long-term capital growth primarily through investment in a portfolio of debt securities issued by Chinese borrowers both offshore and in mainland China.
Wilfred Wee
Portfolio Manager
Peter Eerdmans
Portfolio Manager
Why invest in Chinese fixed income?
- Strategic opportunity to invest in China’s internationalisation story at attractive yields
- Allocating to Chinese fixed income can help diversify overall portfolio returns
- China’s credit markets are diverse and differentiated, and offer opportunities across the cycle
- The renminbi offers investment opportunity
- Gain exposure to the world’s largest developing bond market that is under-represented and set to increasingly feature in global fixed income allocations
- Manage US$3.2bn in Asian EMD assets within global EMD portfolios, as at 31 December 2018
Why Investec Asset Management for Chinese fixed Income?
- A long history in emerging markets
- Tried and tested emerging market bond and currency processes
- Investec Asset Management has an established team of experienced professionals and investment process
- The broad investment mandate allows for a best-ideas China-centric fixed income fund that invests across the universe of offshore and onshore China bonds, spanning the spectrum of rates, credit and FX
Fund Highlights
- Can invest in offshore CNH bonds, onshore CNY bonds and USD-denominated bonds issued by Asian companies that are strongly linked to China's economy
- Broad investment mandate that allows for active management to unlock relative value opportunities across the onshore CNY, offshore CNH and US$ markets
- Fund targets 1.5% per annum, gross of fees, over rolling three-year periods versus the Markit iBoxx Asia Local Bond Index China Offshore
Video: All China Bond
Performance target will not necessarily be achieved, losses may be made.
Specific risks
Geographic / Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Default: There is a risk that the issuers of fixed income investments (e.g. bonds) may not be able to meet interest payments nor repay the money they have borrowed. The worse the credit quality of the issuer, the greater the risk of default and therefore investment loss. Derivatives: The use of derivatives may increase overall risk by magnifying the effect of both gains and losses leading to large changes in value and potentially large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Interest rate: The value of fixed income investments (e.g. bonds) tends to decrease when interest rates rise. Government securities exposure: The Fund may invest more than 35% of its assets in securities issued or guaranteed by a permitted sovereign entity, as defined in the definitions section of the Fund’s prospectus.
Important information
All information is as at 31.12.18 unless otherwise stated.
