China’s economy is on a steady path to recovery, as seen by the normalisation of economic data. China is the only major economy to have positive economic growth in 2020, despite the impacts of COVID-19.
China GDP growth vs. rest of the world
Source: IMF, Bloomberg as of September 2020.
The pace of China’s market liberalisation has picked up over the past few years, and this has prompted major index providers to include Chinese assets in their indices.
China remains under-represented in global equity indices
Source: Bloomberg, MSCI, as of 31 July 2020. Equity index used: MSCI All-Country World Index.
Technological innovation, as well as high quality growth and domestic demand, were featured in China’s latest Five-Year Plan (2021-2025). The pursuit of self-reliance in innovation and technology will be a pillar strategy for national development in the next five to 15 years.
China investments in technology 2020-2025
Source: China Centre for Information Industry Development, as of May 2020
Chinese equities have relatively low correlations with their global counterparts, potentially improving returns and lowering the volatility of global portfolios.
Chinese equities have relatively low correlation to global equities
Source Bloomberg. Correlation calculated with MSCI indexes in base currency, for the period from 30 October 2010 to 30 October 2020.
1. Source: China Banking News, as of April 2020
2. Source: Statista, as of June 2020
3. Source: Hurun Research Institute, as of August 2020. A unicorn company is a start-up with a valuation over USD 1bn
4. Source: China emerges as global tech innovation leader, CIO Journal, Deloitte, 30 October 2019
Concentration Risk: The Fund may be concentrated in a limited number of securities, economic sectors and/or countries. As a result, it may be more volatile and have a greater risk of loss than more broadly diversified funds
Counterparty Risk: The possibility that the counterparty to a transaction may be unwilling or unable to meet its obligations
Derivatives Risk: Derivatives can behave unexpectedly. The pricing and volatility of many derivatives may diverge from strictly reflecting the pricing or volatility of their underlying reference(s), instrument or asset
Emerging Markets Risk: Emerging markets are less established, and often more volatile, than developed markets and involve higher risks, particularly market, liquidity and currency risks
Exchange Rate Risk: Changes in currency exchange rates could reduce or increase investment gains or investment losses, in some cases significantly
Index Tracking Risk: To the extent that the Fund seeks to replicate index performance by holding individual securities, there is no guarantee that its composition or performance will exactly match that of the target index at any given time (“tracking error”)
Investment Leverage Risk: Investment Leverage occurs when the economic exposure is greater than the amount invested, such as when derivatives are used. A Fund that employs leverage may experience greater gains and/or losses due to the amplification effect from a movement in the price of the reference source
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Operational Risk: Operational risks may subject the Fund to errors affecting transactions, valuation, accounting, and financial reporting, among other things
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Index-based Investing - The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Where overseas investments are held the rate of currency exchange may also cause the value of such investments to fluctuate. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Stock market investments should be viewed as a medium to long term investment and should be held for at least five years. Any performance information shown refers to the past and should not be seen as an indication of future returns.
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