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Germaine Share, Morningstar
A range of external and home-grown factors and events have buffeted Greater China equity markets for more than a year. The gyrations in US interest rate policy stances induced pessimism and then raised the hopes of investors; China’s economic slowdown provoked panic which turned to relief when policy-makers quickly introduced stimulus measures that countervailed the deleveraging pressures on Chinese companies.
However, the Sino-US trade dispute dominates all other influences on investor sentiment.
The Greater China equity fund sector posted an aggregate negative -18.84% return in 2018, compared with -14.8% by the MSCI Golden Dragon Index (a common benchmark for the sector) and -9.42% return by the MSCI AC World Index, according to FE Analytics data.
After a powerful first quarter 2019, the sector and the index remain up for the year with 13.4% and 12.03% returns, respectively, but have underperformed the MSCI World Index (15.52%).
An escalation of the trade dispute, which many commentators earlier this year had expected to subside rather than intensify, is clearly dampening performance in Greater China equity markets – which embrace China, Hong Kong and Taiwan.
Although, fiscal and monetary stimulus measures appear to have reinvigorated mainland China domestic investment and consumption, they are not enough to assuage investors’ concerns about the impact of the tariff war. Few analysts are anticipating any type of resolution at this weekend’s G20 meeting in Osaka.
In this precarious environment for the sector, FSA asked Germaine Share, associate director of manager research at Morningstar Asia, to compare two large, highly-rated Greater China equities products. They are the Invesco Greater China Fund and the Schroder ISF Greater China Fund.