T Rowe Price has debuted the China Evolution Equity Fund in the US, according to a statement from the firm.
In terms of strategy, the fund aims to identify mispriced companies with opportunities driven by change, which include new technology or unique product offerings, a significant increase of market share and companies that are expected to benefit from management changes, regulatory changes or business models.
“China is undergoing unprecedented changes, including an evolving economic model, industrial upgrades and a shifting geopolitical outlook,” said Hong Kong-based Zheng Wenli, who manages the portfolio, in the statement.
“These changes have created an investment landscape with ample mispricing opportunities.”
Management and strategy
Zheng has been managing the Asia ex-Japan sleeve of the firm’s International Discovery Fund since 2014. It is a global equity growth strategy that invests in small- to medium-sized companies outside of the US. Around 11% of the International Discovery Fund’s assets are invested in China, according to the firm’s website.
The new China strategy will also be focusing on small- and medium-sized companies, according to the fund’s prospectus.
The manager will invest in companies listed inside and outside of the mainland, including China A-shares and H-shares in Hong Kong.
The firm also noted that while the fund’s primary benchmark is the MSCI China All Shares Index, it will follow a style-agnostic approach and will be benchmark unconstrained.
China interest
T Rowe has been distributing a variety of equity and fixed income products in Hong Kong and Singapore but the new fund is the first focused solely on China equities, the firm said.
A Hong Kong-based spokeswoman for the firm said that the fund is only available to US investors. She was not able to comment on whether it will be launching the strategy outside of the US, adding that there is still no version of the fund for Asia, such as a Ucits product.
Several fund groups, including UBS AM, have become bullish on China, a sentiment that has been growing in tandem with the inclusion of A-shares on key global indices. Further momentum is coming from the relaxation of onshore regulations in attempt to open China’s financial industry and the expectation that phase one of the trade dispute is about to be resolved.
The MSCI China Index is up about 18% year-to-date in US dollar terms.
The CSI 300, which has onshore company constituents, is up 32%, beating the S&P 500 (29%).
However, HSBC Global AM has warned about A-share market volatility.
