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China A share exposure boosts fund returns

The top performing funds that tap China's A-share markets have soared since the Stock Connect launched and China cut interest rates, but they haven't beat their benchmarks.

Chinese shares have rallied significantly since the launch of the Hong Kong-Shanghai Stock Connect in November, a rise supported by other central government measures such as a cut in interest rates. 

Earlier this year, authorities also expanded the pilot RMB Qualified Foreign Institutional Investor scheme to countries outside of Hong Kong. 

Against this backdrop, we took a look at the performance of the top five funds investing in Chinese stocks, which have beat their peers but not their benchmarks, according to FE Analytics data:



1. Fullerton China A Share Fund – Class C


With 37.3% return, the Fullerton China “A” Share Fund – Class C emerges as the best performing fund. Its returns slightly lagged its benchmark index, the FTSE China A50, which rose 37.4% during the period.

The $45.2m Cayman Islands-domiciled fund was incepted in March 2009. Its top stock picks include names like China Minsheng Bank (11.1% weighting), China Merchant Bank (10.2%) and Ping An Insurance Group (10.1%).

The fund is heavily concentrated on the financials sector with a 59.7% allocation in the portfolio followed by consumer discretionary (12%) and industrials companies (7.9%).

In its latest factsheet, the fund house said: “We believe liquidity will continue to improve. Although the macro economy is still slowing, structural change is underway and China’s sovereign risk is decreasing. We are positive on the China equity market.”

“We continue to focus on growth companies with sustainable growth potential, and also look for opportunities that may arise from the economic shift [export-oreinted to consumption-based economy].”

2. HS China A Share Focus A2



As of 31 October, the fund from Hang Seng Investment Management had $105.4m in assets under management. Over the one-year period, it registered a 31.9% return, underperforming its benchmark, FTSE China A50 Index, which surged by 37.4%.

In terms of its top holdings, the fund has made investments in Hang Seng China A-Share FlexiPower Fund, which accounts for nearly 9% of its portfolio. Ping An Insurance and China Merchants Bank also featured in the top three.

Financials, consumer goods and industrial companies were the top three sector allocations with 60.6%, 16.8% and 9.8% weighting, respectively.

3. Manulife China A Segregated Portfolio



The Cayman Islands-domiciled Manulife fund was launched in November 2008 and manages $111.3m in assets as of 30 September.

The fund generated a 27.1% return over a one-year period, underperforming its benchmark, the CSI 300 index, which rallied by 34.3%.

CITIC Securities, Ping An Insurance (Group) Company of China and China Minsheng Banking were the top holdings of the Manulife fund.

In terms of sector breakdown, the fund favoured investments in 11.1% information technology companies with an 11% weighting in the portfolio, followed by consumer discretionary (14.2%) and financials (34%).

4. Fortis Flexi Equity Small Caps China A


The Luxembourg-domiciled fund invests in small-cap companies with market capitalisation less than RMB10bn ($1.6bn).

The fund is the smallest on our list of the top five, with assets worth $12.6m as at the end of October. 

5. Allianz China A-Shares



The Luxembourg-domiciled vehicle, with a 23.6% return, lagged its benchmark index, the MSCI China A which rose 32.7% throughout the year.

As of 31 October, the $56.1m fund had its highest allocation in sectors such as financials (37.1% weighting) followed by industrials (17.5%) and consumer discretionary (12.4%)

The fund’s top three stock picks were from the financial sector: Citic Securities Co-A Financials, Ping An Insurance Group Co-A Financials and Haitong Securities.

Part of the Mark Allen Group.