Factsheet Singapore October 2018 All data as at 30 September 2018 unless otherwise stated Eastspring Investments China Equity Fund RATINGS Class A Morningstar Overall Rating QQQQ FUND DETAILS Fund size (mil) 302.4 Fund base currency Fund dealing frequency USD Daily Net asset value (Class A) USD 15.209 ISIN (Class A) Inception date (Class A) Benchmark (BM) MSCI China 10/40 Index^ LU0307460666 02-Jul-07 ^The MSCI Index is calculated with dividends reinvested. FUND MEASURES Number of Securities 38 3 year tracking error(%) (Class A) 3.2 3 year sharpe ratio (Class A) 0.6 3 year volatility(%) (Class A) 17.2 Source: Morningstar SECTOR WEIGHTS (%) Financials 28.2 Communication Services 20.0 Consumer discretionary 17.3 Energy 7.2 Industrials 5.1 Health care 5.0 Real estate 4.0 Utilities 3.6 Other sectors 7.4 Cash and cash equivalents 2.2 Due to rounding, the allocation table may not add up to 100% or may be negative. INVESTMENT OBJECTIVE This Sub-Fund aims to maximise 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) 50 45 40 35 30 25 20 15 10 5 0-5 -10-15 2013 2014 2015 2016 2017 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 -4.8-9.4-12.3-4.8 8.8 3.7 6.6 3.3 Bid-bid 0.3-4.6-7.7 0.2 10.7 4.8 7.1 3.8 Benchmark -0.9-6.3-8.3-2.0 12.9 7.4 8.1 4.5 : per annum. Source: Eastspring Investments (Singapore) Limited. 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. For full details, please refer to the performance disclosure. TOP 10 HOLDINGS (%) 1. ALIBABA GROUP HOLDING ADR 9.3 2. TENCENT HOLDINGS LTD 9.0 3. CHINA CONSTRUCTION BANK CORP H 8.2 4. PING AN INSURANCE GROUP OF CHINA 6.4 5. CNOOC LTD 4.5 6. AGRICULTURAL BANK OF CHINA LTD H 3.7 7. CHINA TAIPING INSURANCE HLDGS LTD 3.4 8. CHINA MERCHANTS BANK LTD H 3.2 9. SINOPHARM GROUP H 2.9 10. CHINA PETROLEUM AND CHEMICAL CORP 2.7 Page 1 / 5
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 15.209 IOFCHEA LX LU0307460666 02-Jul-07 Cash 5.000 1.500 A S SGD 12.888 IOCHASS LX LU0588546209 07-Feb-11 Cash, SRS 5.000 1.500 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 0.500 USD1,000 USD100 N.A. N.A. N.A. N.A. A S SGD 0.500 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 2017 2016 2015 2014 2013 A Offer-bid USD -4.8-9.4-12.3-4.8 8.8 3.7 6.6 3.3 37.4-7.3-12.0-2.7-5.9 Bid-bid USD 0.3-4.6-7.7 0.2 10.7 4.8 7.1 3.8 44.6-2.4-7.4 2.4-1.0 Benchmark USD -0.9-6.3-8.3-2.0 12.9 7.4 8.1 4.5 49.3 1.0-7.8 8.0 3.6 A S Offer-bid SGD -5.0-9.1-10.2-4.2 7.4 5.5 2.7 27.1-5.5-5.8 1.9-2.7 Bid-bid SGD 0.0-4.3-5.5 0.9 9.2 6.6 3.4 33.8-0.5-0.9 7.3 2.4 Benchmark SGD -1.1-6.1-6.2-1.4 11.4 9.3 5.9 38.1 2.8-1.3 13.3 7.1 Performance Disclosure: : 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. Wef July 2018, the monthly fund and benchmark returns calculated are aligned to the last NAV date of the fund for the month. Past performance information presented is not indicative of future performance. Factsheet Singapore October 2018 All data as at 30 September 2018 unless otherwise stated Page 2 / 5
COMMENTARY Commentary sources 1.Eastspring Investments (Singapore) Limited Performance Review Despite a rally late in the month, the MSCI China index declined 1.4% as tariff worries added to softer economic growth numbers. MSCI Hong Kong also declined marginally 0.3% in USD terms. In September, the US imposed fresh tariffs of 10% on China goods worth around USD$200bn. China responded with its own tariffs on a limited USD$60bn of US goods. The markets responded by rallying modestly, as investors had been expecting an immediate US tariff increase of 25%. During the month, Beijing promised to step up domestic policy easing across the monetary, fiscal and regulatory fronts aimed at reducing the negative impact from the trade war. These measures included an increase in export tax rebates and import tariff cuts. Meanwhile, economic data came in mixed. Retail sales grew more than expected at 9% year-on-year (YoY); Industrial Production growth also grew slightly, again reversing August s numbers, but consumer price inflation rose to a six-month high of 2.3%, above expectations but still well below the 3% target. The trade surplus narrowed to USD$28bn overall but widened with the US to USD$31bn, with exports to the US increasing in August despite tariffs setting in. Elsewhere in Hong Kong, banks raised their prime lending rate in late September, the first time since 2006. The interest rate hike was widely anticipated by the market, although the magnitude of 12.5 basis points (bps) increase was smaller than expected. Key Contributors The overweight positions in China Taiping Insurance, CNOOC and China Railway Group contributed to relative performance. China Taiping Insurance s share price rose over 10% in September. The insurance conglomerate reported strong agency new business momentum in August, on the back of higher agency expansion and product sales. While the resignation of chairman Mr. Wang Bin during the month could bring about short-term volatility, long-term fundamentals and a strong execution strategy allow us to continue to be positive on the stock. China Taiping currently trades at a 2019e P/E of 8.0x. CNOOC s share price rose about 12% during the month. The producer of offshore crude oil and natural gas was largely buoyed by higher oil prices which exceeded USD$80 a barrel for the first time since 2014. The Fund continues to be overweight CNOOC on the back of strong oil price momentum and the company s growth-focused strategy which could boost shareholder value in the longer term. The stock currently trades at a 2019e P/E of 9.1x and has an attractive 2019e dividend yield of 5.1%. Shares of China Railway Group rose over 11% in September. The company s 1H18 results announced on 30 August beat expectations, notably due to an improvement of gross profit margins from a better revenue mix and economies of scale as well as higher investment income from subsidiaries. Company management expects new contracts and revenue to accelerate in 2H18 thanks to an easing monetary environment. The company currently trades at a 2019e P/E of 5.9x. Key Detractors The overweight positions in KWG Group Holdings and off-benchmark positions in Lens Technology and MGM China Holdings detracted from relative performance. KWG Group s share price declined 14% during the month following the release of relatively lackluster 1H18 results. Investor sentiment was dimmed by lower than expected topline booking, a decline in gross margin and rising leverage. However, we remain positive that the company can meet its contracted sales target due to active land banking and upcoming launches. The company currently trades at a 2019e P/E of 2.9x and pays a 2019e dividend yield of 12.5%. Lens Technology s share price declined 16% in September following the release of its 2Q18 results. While the company reported strong sales from its 3D glass, gross margins of all three of its major operating segments declined due to lower utilisation rates and average selling price. Although fears of more competition continue to weight on sentiment, we believe that the company could see growth in the upcoming quarters as the consumer electronics segment recovers on the back of new iphone and Android launches. The Chinese A-share company currently trades at a 2019e P/E of 9.8x. MGM China s share price declined over 16% during the month in line with the gaming sector in Macau. Overall gross gaming revenue (GGR) for September was impacted by Typhoon Mangkhut and grew 2.8% YoY, the lowest growth in two years. However, we remain positive on the stock as its medium-term growth outlook remains intact driven by the ramp of its recently launched MGM Cotai casino and strong management team. The company currently trades at an undemanding 2019e P/E of 12.5x. Fund Activity The Fund initiated new positions in China Medical System Holdings and New Oriental Education & Technology and increased exposure to China Construction Bank. To fund these purchases, the Fund fully exited from Bank of China and JD.com and trimmed position in Baidu.com. Outlook Factsheet Singapore October 2018 All data as at 30 September 2018 unless otherwise stated Page 3 / 5
COMMENTARY 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. China equities are now trading below their 10-year historical P/E and P/B averages. Given the recent market corrections, there are now a number of stocks that are trading substantially below their intrinsic value. In addition, with Chinese A-shares being included into the MSCI China universe, there are certainly more opportunities for stock picking within China. The first stage of the A-share inclusion took place at the end of May 2018 while the second stage of the inclusion was just completed at the end of August 2018. As a result, A-shares now have a 5% inclusion factor into MSCI China indices. It s expected that A-shares will take on an even bigger inclusion factor by the end of 2019. 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. Despite the recent tensions over trade disputes between the US and China, the portfolio manager believes that consistency in the implementation of reforms on state-owned enterprises will help support market sentiment and conviction. 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 October 2018 All data as at 30 September 2018 unless otherwise stated Page 4 / 5
IMPORTANT INFORMATION Investment manager - Eastspring Investments (Singapore) Limited Rating should not be taken as a recommendation. 2018 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Morningstar Category: China Equity Disclaimer This document is issued by Eastspring Investments (Singapore) Limited (UEN: 199407631H). 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: 199407631H 10 Marina Boulevard #32-01 Marina Bay Financial Centre Tower 2 Singapore 018983 T: (65) 6349 9711 F: (65) 6509 5382 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 October 2018 All data as at 30 September 2018 unless otherwise stated Page 5 / 5