ChinaAMC Trends and Insights - April 2018
Chinese depository receipts to be launched soon
Following HKEx’s plan to allow companies to list with weighted voting rights, market expects “Unicorns” –unlisted companies valued at more than US$1 billion –and Chinese Internet giants that are already traded on equity markets abroad will be attracted back to China’s markets. China will launch its Chinese Depositary Receipt (CDR) soon, according to Yan Qingmin, vice chairman of China Securities Regulatory Commission, and the first batch of CDR will be granted to new economy enterprises, or unicorn companies when it launches.
Stock Connect daily quota to quadruple on 1 May
The daily quota for both Shanghai and Shenzhen Connect will be quadrupled on 1 May, according to a joint announcement by the China Securities Regulatory Commission and Hong Kong’s Securities and Futures Commission.
Bloomberg to add China to its Barclays Global Aggregate Index
On 23 March, Bloomberg announced the inclusion of RMB-denominated government and policy bank securities into Bloomberg Barclays Global Aggregate Index (the “Index”). The addition will be phased in over a 20-month period starting April 2019. Once fully implemented, there will be 386 Chinese securities included in the Index with a weighting of 5.49% (based on data as of 31 January 2018)^. The scope will include RMB-denominated investment-grade rates bonds (i.e. Chinese government and sovereign bonds and policy bank bond futures) and corporate bonds, with maturity of more than one year.The inclusion is expected to drive global allocations and stronger demand for the Bond Connect scheme.
Market Outlook
Volatility in the Hong Kong stock market intensified in March, putting an end to the continuous net inflows under the Stock Connect scheme. Southbound capital even sold off Chinese banking and insurance stocks in a few trading days. Despite this, we still believe that the appeal of Hong Kong stocks to Mainland Chinese capital remains intact, given the relatively more attractive fundamentals and valuations of Hong Kong stocks as compared to that of the global market.
A-shares
The SSE Composite Index weakened in March. However, the Growth Enterprises Market (GEM) recorded considerable gains as capital started to switch to small-and medium-sized quality stocks in GEM. Similar to Hong Kong equities, underperforming sectors such as iron and steel, cement, banking and insurance detracted in March and dragged on the performance of the SSE Composite Index. The news about overseas-listed Chinese “unicorn” returning to the A-share market has aroused investors’ interest in “new economy” stocks of small-and medium-sized enterprises.
In the short term, we expect the recent high market volatility to continue. The trade war and Syria situation should bring more uncertainty. However, China’s economy did well in 1Q, with GDP up 6.8% yoy, and strong private investment and consumption, which bodes well for the relevant company earnings growth.
ChinaAMC Artificial Intelligence Strategy Q1 Live Performance
ChinaAMC AI China Alpha Strategy (ACAS) is running on live performance. The Q1 result was appealing, with a positive return of 1.43% while MSCI China A Index down by -5.14%. Top sector picks were consumer (49%) and healthcare (13%).
Corporate highlights
Asia Asset Management Best of the Best Awards 2018
ChinaAMC(HK) is thrilled to have won two 2018 Best of the Best Awards given by Asia Asset Management (“AAM”) for the Best China Fund House (Hong Kong) and the Best ETF Product.
Hong Kong Leaders’ Choice Brand Awards 2018
ChinaAMC(HK) has been awarded two prestigious accolades –the “Excellent Brand of China Fund Management” and the “Excellent Brand of ETF Provider” at the “Hong Kong Leaders’ Choice 2018” award presentation ceremony organized by Metro Finance. This annual award is designed to honor distinguished brands and organizations. The award has proven to be highly representative, as award winners are selected by a judging panel comprised of industry leaders, company CEOs and senior management from major organizations.
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