Investors have started paying more attention to company valuation, which has tended to result in value stocks outperforming growth stocks, according to Morningstar.
To capture the what the firm believes is a trend, the value-oriented HSBC Jintrust Large Cap Equity Fund has been added to its China Best Mutual Fund Ideas list.
The product is managed by HSBC’s onshore joint-venture firm. Its manager, Qiu Dongrong uses a bottom-up stock-picking approach that aims to identify undervalued names and analyse the fundamentals on the company and sector level. 80% of the fund’s assets are in large-cap stocks. It delivered an annualised return of 43.9% in the two-and-a-half years until 31 March 2017, according to Morningstar.
Two pure bond funds have also been added to the list. Unlike most Chinese fixed income funds, which have the flexibility to enhance returns with a limited equity exposure, pure bond funds are mandated to invest in bonds only and cannot invest in convertibles. The category is new, with only a three-year track record.
|HSBC Jintrust Large Cap Equity Fund
|GF Industry Leaders Mixed Assets Fund
|E Fund Credit Bond Fund
|China Universal Private-owned Enterprises Fund
|Yinhua Credit Theme Sijihong Bond Fund
|Yinhua Midcap & Smallcap Mixed Fund
The newly-added E Fund Credit Bond Fund is managed by Hu Jian, responsible for the macro-level analysis, and Ji Lingyun who focuses on credit allocation. The fund invests 80% of its assets in credit, diversified across industries and credit ratings.
Another fixed income product, the Yinhua Credit Theme Sijihong Bond Fund, is currently invested mostly in high-quality municipal bonds, revealing the conservative bias of its managers Zou Weina and Wu Wenming. The fund’s track record stands out from its peers’, according to Morningstar, having beaten the average in each calendar year since inception.
Three funds were removed from the best funds list due to the departures of managers with successors who are less experienced.
They are the GF Industry Leaders Mixed Assets Fund, the China Universal Private-owned Enterprises Fund and The Yinhua Midcap & Smallcap Mixed Fund.
Two more funds, the CIFM China Multi-Assets Fund and the Lion Dynamic Asset Allocation Mixed Type Fund have been put on a watch list for the same reason.
Morningstar’s China Best Mutual Fund Ideas list now consists of 25 funds: two equity funds, 15 allocation funds and eight bond funds, of which two are pure bond funds.
Twelve funds included in the list have been approved for southbound distribution in Hong Kong under the Mutual Recognition of Funds (MRF) scheme. The remaining funds are waiting for approval.