Eastspring Investments China Equity Fund

Transcription

1 Factsheet Singapore May 2018 All data as at 30 April 2018 unless otherwise stated Eastspring Investments China Equity Fund RATINGS Class A Morningstar Overall Rating QQQ FUND DETAILS Fund size (mil) Fund base currency Fund dealing frequency USD Daily Net asset value (Class A) USD ISIN (Class A) Inception date (Class A) Benchmark (BM) MSCI China 10/40 Index FUND MEASURES LU Jul-07 Number of Securities 36 3 year tracking error (Class A) year sharpe ratio (Class A) year volatility (Class A) 19.3 Source: Morningstar SECTOR WEIGHTS (%) Financials 29.8 Information technology 29.5 Consumer discretionary 9.1 Energy 6.7 Real estate 5.0 Utilities 4.6 Industrials 4.2 Health care 3.9 Telecommunication services 3.1 Cash and others 4.1 INVESTMENT OBJECTIVE This Sub-Fund aims to maximize long-term total return by investing primarily in equity and equity-related instruments of corporations, which are incorporated in, or listed in, or operating principally from, or carrying on significant business in, or derive substantial revenue from, or whose subsidiaries, related or associated corporations derive substantial revenue from, the People's Republic of China (PRC). The investments of the Sub-Fund include, but are not limited to, listed securities in the Recognised Markets, depository receipts including American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), debt securities convertible into common shares, preference shares and warrants. PERFORMANCE Calendar year returns (%) (Class A) Offer-bid Bid-bid Benchmark Returns (%) Class A 1 m 3 m YTD 1 y 3 y 5 y 10 y Since inception Offer-bid Bid-bid Benchmark : per annum. Source: Eastspring Investments (Singapore) Limited. Returns are based in USD and computed on bid-bid basis with net income reinvested, if any. Offer-bid is inclusive of sales charge which is subject to changes. Since inception returns for periods less than a year are not annualised. From inception to 30-Jun-16, the benchmark was the MSCI China Index. Calendar year returns are based on the share class performance for the year, and if the share class was incepted during a particular year, the returns shown relate to the performance of the share class since its inception to the end of that calendar year. TOP 10 HOLDINGS (%) 1. CHINA CONSTRUCTION BANK-H TENCENT HOLDINGS ALIBABA GROUP HOLDING-SP ADR AGRICULTURAL BANK OF CHINA-H NETEASE.COM INC-ADR CNOOC PING AN INSURANCE GROUP CO-H CHINA PACIFIC INSURANCE GR-H CHINA MOBILE KWG PROPERTY HOLDING 3.0 Page 1 / 5

2 SHARE CLASS DETAILS Share class Currency Net asset value Bloomberg ticker ISIN Inception date Subscription method Initial sales charges% (max) Annual management fee % (Current) A USD IOFCHEA LX LU Jul-07 Cash A S SGD IOCHASS LX LU Feb-11 Cash, SRS Share class Currency Annual admin fee% (max) Minimum initial investment Minimum subsequent investment Distribution frequency Ex-date Dividend per share Annual dividend yield % A USD USD1,000 USD100 N.A. N.A. N.A. N.A. A S SGD SGD1,000 SGD100 N.A. N.A. N.A. N.A. Distributions are not guaranteed. Distributions may be paid out of distributable income, capital or both. Important Notes: (i) Payment of distributions out of capital amounts to a return or withdrawal of part of an investor s original investment or from any capital gains attributable to that original investment; and (ii) Any distributions involving payment out of the Fund s capital may result in an immediate reduction of the net asset value per share. Funds with Monthly and Quarterly Distribution Frequency: Annual Dividend Yield = (Dividend amount / Reference NAV) x (No. of calendar days in a year / No. of calendar days in distribution period) x 100%. Funds with Yearly Distribution Frequency: Annual Dividend Yield = (Dividend amount / Total Net Assets) x (No. of calendar days in a year / No. of calendar days in distribution period) x 100%. "N.A." means that this share class does not distribute dividends. Returns (%) Calendar year returns (%) Since 3 y 5 y 10 y Share class Currency 1 m 3 m YTD 1 y inception A Offer-bid USD Bid-bid USD Benchmark USD A S Offer-bid SGD Bid-bid SGD Benchmark SGD : per annum. Source: Eastspring Investments (Singapore) Limited. Returns are based in share class currency and computed on bid-bid basis with net income reinvested, if any. Offer-bid is inclusive of sales charge which is subject to changes. Since inception returns for periods less than a year are not annualised. The benchmark for the hedged share classes, if any, is also calculated on a hedged basis. From inception to 30-Jun-16, the benchmark was the MSCI China Index. Calendar year returns are based on the share class performance for the year, and if the share class was incepted during a particular year, the returns shown relate to the performance of the share class since its inception to the end of that calendar year. Factsheet Singapore May 2018 All data as at 30 April 2018 unless otherwise stated Page 2 / 5

3 COMMENTARY Commentary sources 1.Eastspring Investments (Singapore) Limited Performance Review In April, the protectionist policy negotiations between China and the U.S. continued during the month with further items added to the tariff dialogue. The impact on the global stock market was limited since much of the tariff war fear factor was already priced into equity pricing during March. A short-lived geopolitical tension between the U.S. and Syria over a suspected poison gas attack combined with ongoing OPEC-led supply cuts and strong global demand pushed up oil prices higher. Asia Pacific ex Japan was 1% higher although performances were mixed. Asian shares gained support on the back of easing tensions in the Korean peninsula and positive first quarter earnings releases. During the month, Chinese equity markets were broadly flat while Hong Kong equities rose 3.3%. The tariff fears stabilized post Xi Jinping s Boao Forum s speech pledging to open up the Chinese economy. However, tensions were reignited with the ban on Chinese telecom equipment maker ZTE because of its alleged illegal dealings with Iran as U.S. companies are now prohibited from selling components to ZTE for the next seven years. Despite rising global tensions, China vowed to achieve this year s economic targets by increasing domestic demand and maintaining healthy credit growth. If exports decline, PBOC could shift policy from a slight tightening bias to a looser stance, or even back to growth-boosting measures. During the month, China unexpectedly cut its reserve requirements rate (RRR) to reduce financing costs for banks and boost lending to small firms. Key Contributors The overweight positions in Huaneng Renewables Corp, Autohome Inc, and CNOOC contributed to relative performance this month. A Chinese wind power company, Huaneng Renewables' share price gained by nearly 20% in April as the company reported strong 1Q18 results which were slightly above market expectations. The company has been benefiting from supportive government policies as its 1Q18 net profit grew by 35% year-on-year. The company has been seeing strong wind power generation growth which has mainly been driven by ample wind resources in various Chinese provinces. The company currently trades at a very attractive 2018e P/E of just 8.1x earnings while also having created net cash inflow of nearly RMB800 million during the first quarter of A Chinese online automobile seller, Autohome continues to excel as its share price gained another 13% during April. The company's core business remains strong as it continues to benefit from a market consolidation of China's online auto marketing business. The company will continue to develop innovative businesses such as data products and auto financing as the firm has already secured more than 5,000 dealer customers and is expecting even stronger dealer penetration as its business continues to mature. Autohome currently trades at a 2018e P/E of 27x earnings but with strong earnings growth expected over the next couple of years. The company's 2020e P/E is currently at 18x earnings. The third-largest national oil company in China, CNOOC's share price rose in April along with the other major oil producers on the back of strong gains in crude oil prices. CNOOC's share price gained nearly 14% in April while some of the other major Chinese oil producers like Sinopec and Petrochina also rose by 11% and 7% respectively. Despite the strong gains for CNOOC, the Fund continues to be overweight in both CNOOC and Sinopec as both Chinese oil companies are trading at low P/E valuations (10x 2018e earnings), while also providing a dividend yield of over 5%. Key Detractors The overweight positions in Sinopharm Group Co and Netease.com, and the underweight position in Baidu detracted from performance this month. Sinopharm's share price declined by over 15% in April as the company announced an unexpected profit warning during the month. The company reported its 1Q18 net profits which were down by over 32% year-on-year which were mainly driven by a rise in its labour and rental costs coupled with a sharp increase in its financing costs. Despite some of its short term negative market sentiments, Sinopharm is China's largest pharma distributor and should continue to benefit from the upgraded policies in China as it continues to gain market share. The company trades at a 2018e P/E of just 13.4x earnings making it one of the cheapest Chinese healthcare companies within the investment universe. Netease's share price fell by 8% in April as the Chinese online gaming company was expecting a slight decline in its 1Q18 results with softer margins due to increased weighting in lower margin e-commerce businesses in its sales mix. Despite some of its short term concerns, Netease is expected to see a turn-around in its core mobile gaming business given the strong contributions coming from some of their new gaming titles that were launched recently. Netease remains to be one of the cheaper Chinese IT companies as it currently trades at a 2018e P/E of just 17.5x earnings. Baidu's share price had a strong rebound in April with share prices rising by over 12% during the month as the company announced strong margins in its 1Q18 reported earnings. Despite some good gains, the growth of its search business remains somewhat lackluster as it continues to face rising competitions from WeChat and other vertical searches in China. Given the questions surrounding its future growth opportunities and Factsheet Singapore May 2018 All data as at 30 April 2018 unless otherwise stated Page 3 / 5

4 COMMENTARY slightly inflated valuation of 25x FY2018e P/E, the Fund has chosen to invest in other Chinese IT stocks that are trading well below its intrinsic value. Fund Activity Among the notable trades, the Fund initiated a new position in Kerry Logistics Network Ltd, and increased exposures to Tencent Holdings Ltd and China Resources Gas Group Ltd. These were funded by selling out of Sinopec Kantons Holdings Ltd, and reducing exposures to Bank of China Ltd and Shanghai Industrial Holdings Ltd. Outlook We continue to monitor China s balancing act of undertaking reforms while trying to rein in credit expansion and sustain economic growth. By continuing to have tighter controls and stronger financial oversight, President Xi Jinping will continue to help transform China s economy as it strives for quality over quantity. Given the slowdown that we had witnessed in China from 2012 to 2016 as a result of the RMB4 trillion stimulus package after the global financial crisis, Chinese corporates earnings growth is once again on an upward trajectory in China with most expecting Chinese corporates to see earnings grow by around 16% per annum over the next two years. Given the cyclical turnaround for most Chinese corporates, the overall investment opportunity in China has once again become more attractive. The portfolio manager believes that consistency in the implementation of reforms on state-owned enterprises will support market sentiment and conviction. China s approach towards leverage will continue to interest investors as this structural issue continues to raise concerns over China s credit cycle. As a result, Chinese financial stocks have been key underperformers over the past few years and we are already seeing signs of sector rotation especially given the fact that Chinese IT stocks have significantly outperformed most other sectors during this time. Being long-term bottom-up investors, we will continue to search for stocks that are attractively valued versus their history and fundamentals, regardless of short-term market noise. In fact, we would take the opportunity to exploit those market inefficiencies to buy and sell stocks when the opportunity presents itself. Factsheet Singapore May 2018 All data as at 30 April 2018 unless otherwise stated Page 4 / 5

5 IMPORTANT INFORMATION Investment manager - Eastspring Investments (Singapore) Limited Rating should not be taken as a recommendation Morningstar. All rights reserved. Morningstar Category: China Equity Disclaimer This document is issued by Eastspring Investments (Singapore) Limited (UEN: H). Eastspring Investments (Singapore) Limited is the appointed Singapore Representative and agent for service of process in Singapore. This document has not been reviewed by the Monetary Authority of Singapore. The Fund is a sub-fund of Eastspring Investments, an open-ended investment company with variable capital (Société d Investissement à Capital Variable or SICAV) registered in the Grand Duchy of Luxembourg, which qualifies as an Undertaking for Collective in Transferable Securities ( UCITS ) under relevant EU legislation. The Management Company of the SICAV is Eastspring Investments (Luxembourg) S.A., Grand-Duchy of Luxembourg. All transactions into the Fund should be based on the Singapore Prospectus and Product Highlights Sheet ( PHS ). Such documents, together with the articles of incorporation of the SICAV and the most recent financial reports, may be obtained free of charge from Eastspring Investments (Luxembourg) S.A., or at relevant Eastspring Investments business units/website and their distribution partners. This document is solely for information and does not have any regard to the specific investment objectives, financial or tax situation and the particular needs of any specific person who may receive this document. This document is not intended as an offer, a solicitation of offer or a recommendation, to deal in shares of securities or any financial instruments. Please refer to the offering documents for details on fees and charges, dealing and redemption, product features, risk factors and seek professional advice before making any investment decision. An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. The value of shares in the Fund and the income accruing to the shares, if any, may fall or rise. Where an investment is denominated in a currency other than the base currency of the Fund, exchange rates may have an adverse effect on the value price or income of that investment. Investors should not make any investment decision solely based on this document. Investors may wish to seek advice from a financial adviser before purchasing shares of the Fund. In the event that an investor may choose not to seek advice from a financial adviser, the latter should consider carefully whether the Fund in question is suitable for him. Past performance and the predictions, projections, or forecasts on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of Eastspring Investments or any of the funds managed by Eastspring Investments. There are limitations to the use of indices as proxies for the past performance in the respective asset classes/sector. The Fund may use derivative instruments for efficient portfolio management and hedging purposes. Distributions are not guaranteed and may fluctuate. Past distributions are not necessarily indicative of future trends, which may be lower. Distribution payouts and its frequency are determined by the Board of Directors, and can be made out of (a) income; or (b) net capital gains; or (c) capital of the Fund or a combination of any of (a) and/or (b) and/or (c). The payment of distributions should not be confused with the Fund s performance, rate of return or yield. Any payment of distributions by the Fund may result in an immediate decrease in the net asset value per share. The preceding paragraph is only applicable if the Fund intends to pay dividends / distributions. Eastspring Investments companies (excluding JV companies) are ultimately whollyowned / indirect subsidiaries / associate of Prudential plc of the United Kingdom. Eastspring Investments companies (including JV's) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America. In case of discrepancy between the English and Chinese versions, the English version shall prevail. For more information, please contact: Eastspring Investments (Singapore) Limited UEN: H 10 Marina Boulevard #32-01 Marina Bay Financial Centre Tower 2 Singapore T: (65) F: (65) Notes: Investors should note that the net asset value of this Fund is likely to have a higher volatility due to its concentration of investment in a single/and or limited number of countries. eastspring.com.sg Factsheet Singapore May 2018 All data as at 30 April 2018 unless otherwise stated Page 5 / 5