Navigating the opportunities of China’s new economy

Its strong performance is reflected in the MSCI China Index’s year-to-date total return of 48.57 per cent compared with MSCI World Index’s of 17.46 per cent, according to Bloomberg. 
As for China’s economic outlook, positive signals are shown in the official Purchasing Managers’ Index (PMI) rise to 52.4 in September, compared to 51.7 in August. This marked the highest reading since April 2012. Moreover, The World Bank also raised the country economic forecast, expecting its economy to grow 6.7 per cent in 2017, increased from 6.5 per cent in the previous forecast. The forecast for 2018 has been elevated to 6.4 per cent from 6.3 per cent in the previous forecast released on April 2017. 
However, special situation investors should closely monitor the 19th National Congress of Chinese Communist Party due on October 18. 
THIS IS ANTICIPATED TO BRING ABOUT CHANGES IN POWER RELATIONS AS FIVE OF SEVEN TOP LEADERS WILL BE RETIRED AND REPLACED BY NEW MEMBERS. 
If the five new leaders are people who are intimate with President Xi Jinping, this will be a positive sign that China’s economic reform would continue successfully. Eventually, this will boost profits from stock investments. 
Asset Plus Fund Management still holds a positive view on China equity market and believes there would be a upside trend in the long run. That’s why we highly recommend investors with risk appetite to overweight this market. Besides, we also see opportunities in stocks benefitting from China’s new economy in the technology and consumption sectors. 
Due to rapid technological advancement, technology-based securities such as Tencent or Alibaba have been growing distinguishably and their profits at the end of Q2 met market expectations. Apart from the technology sector, the consumer industry is also interesting due to increasing purchasing power and economic recovery. 
Concerning valuation, the Chinese securities are interesting compared to those in developed markets. At the present, the A-Share is trading at Forward P/E 13.7, while it is 16.7 in developed markets. (Source: Bank of America Merill Lynch, The flow show, 5 October 2017).
 Hence, it would be said that Chinese equity valuation is still reasonable for long term investment.
For risk appetite investors who are interested in China equity investment, but do not have either time to closely monitor the market or timing strategy expertise, choosing the professionally and actively managed FIF mutual fund to invest in China equity is highly recommended. 
Regarding our outstanding fund, ASP-CHINA is the most interesting. Aiming to take profits from Chinese equities gaining from the new economy, this fund has mostly invested in the master fund, EI Sturdza Strategic China Panda Fund. ASP-CHINA’s strength has been significantly showing in its year-to-date return at 46.32 per cent, compared to 41.48 per cent of its benchmark’s, MSCI China Index. Moreover, compared to FIF mutual funds classified in the Great China Equity group, the year-to-date performance of ASP-CHINA is second to none. (Source: AIMC, as of 29 sep 2017). That’s why ASP-CHINA would be another alternative for investors seeking opportunities from the new China economy. 
Past fund performance may not be indicative of future performance.
 ASP-CHINA is hedged against currency exchange with fund managers’ discretions. Investor might face loss or take profit from currency exchange and might receive redemption amount less than the capital invested. 

Investment entails risk. Investors should thoroughly study prospectus, fund features, return conditions and investment risk before investing. 

Contributed by Asset Plus Fund Management