China A Share - January Commentary
Sharukh Malik Portfolio Manager, Asian & Emerging Markets
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Edmund Harriss Director, Chief Investment Officer, Portfolio Manager
This is a marketing communication. Please refer to the prospectus, supplement and KID/KIID for the Funds before making any final investment decisions. Past performance does not predict future returns.
In 2024, the Guinness China A Share Fund fell by 1.0% in GBP, while the benchmark, the MSCI China A Onshore Index, rose by 13.6%. Further performance data is shown below.
Over the year, relative to the benchmark, the Fund benefited from stock selection in the Health Care sector and a combination of the slight underweight to the Consumer Staples sector and stock selection. Detractors were not holding the large state owned banks in the Financials sector, stock selection in the Materials and Industrials sectors, and no exposure to the Energy and Utilities sectors.
The Fund’s holdings trade at a forward price/earnings ratio of 16.9x, which is well below their 10-year average. This is despite the fact the Fund has minimal exposure to the areas over which investors are most cautious: real estate and the banks. We argue that as more stimulus is announced and China gradually completes its transition away from real estate and towards the new pillar industries, the market is likely to see a valuation rerating.
(Data from 31/12/13 to 31/12/24, source: Bloomberg, Guinness Global Investors calculations. Calculations assume an equally weighted portfolio)
What's more, over the past decade, our holdings in aggregate have grown earnings by 14% a year. This compares favourably to the MSCI China A Onshore Index, where earnings have only grown by 1% a year over the past decade. Based on consensus analyst estimates, the Fund’s holdings in aggregate are expected to grow earnings faster than the index.
Though the Fund does not have a distribution share class, the expected 2024 dividend yield of our companies is 2.3%. So in sum, we argue that a combination of a potential valuation re-rating, long term earnings growth and an attractive dividend yield make the Fund compelling for investors.
In this commentary we review in detail the drivers of fund performance in 2024, its leading and lagging stocks, and changes to the portfolio. We also consider the outlook, where strengthening messages on further stimulus from the government are set against a likely 'wait and see' approach to the new Trump administration.
Learn more about Guinness China A Share
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The information provided on this page is for informational purposes only. While we believe it to be reliable, it may be inaccurate or incomplete. Any opinions stated are honestly held at the time of publication, but are not guaranteed and should therefore not be relied upon. This content should not be relied upon as financial advice or a recommendation to invest in the Funds or to buy or sell individual securities, nor does it constitute an offer for sale. Full details on Ongoing Charges Figures (OCFs) for all share classes are available here.
Risk
The Fund invests only in stocks of companies that are based in, or with significant business activities in China; it is therefore susceptible to the performance of that region. In addition, at least 80% of the assets will be in China A shares, which have a greater participation by retail investors than other markets, so its performance may be more volatile. The Fund is actively managed and uses the MSCI China A Onshore Index as a comparator benchmark only.
Documentation
The documentation needed to make an investment, including the Prospectus, the Key Information Document (KID) / Key Investor Information Document (KIID) and the Application Form, is available from the website www.guinnessgi.com , or free of charge from:
- the Manager: Waystone Management Company (IE) Limited, 2nd Floor 35 Shelbourne Road, Ballsbridge, Dublin DO4 A4E0; or,
- the Promoter and Investment Manager: Guinness Asset Management Ltd, 18 Smith Square, London SW1P 3HZ.
Waystone IE is a company incorporated under the laws of Ireland having its registered office at 35 Shelbourne Rd, Ballsbridge, Dublin, D04 A4E0 Ireland, which is authorised by the Central Bank of Ireland, has appointed Guinness Asset Management Ltd as Investment Manager to this Fund, and as Manager has the right to terminate the arrangements made for the marketing of funds in accordance with the UCITS Directive.
Investor Rights
A summary of investor rights in English is available here: https://www.waystone.com/waystone-policies/
Residency
In countries where the Funds are not registered for sale or in any other circumstances where their distribution is not authorised or is unlawful, the Funds should not be distributed to resident Retail Clients. NOTE: THIS INVESTMENT IS NOT FOR SALE TO U.S. PERSONS.
Structure & Regulation
The Fund is a sub-fund of Guinness Asset Management Funds PLC, an open-ended umbrella-type investment company, incorporated in Ireland and authorised and supervised by the Central Bank of Ireland, which operates under EU legislation. The Fund hasbeen approved by the Financial Conduct Authority for sale in the UK. If you are in any doubt about the suitability of investing in the Fund, please consult your investment or other professional adviser.
Switzerland
This is an advertising document. The prospectus and KID for Switzerland, the articles of association, and the annual and semi-annual reports can be obtained free of charge from the representative in Switzerland: Reyl & Cie SA, Ru du Rhône 4, 1204 Geneva. The paying agent is Banque Cantonale de Genève, 17 Quai de l'Ile, 1204 Geneva.
Singapore
The Fund is not authorised or recognised by the Monetary Authority of Singapore (“MAS”) and shares are not allowed to be offered to the retail public. The Fund is registered with the MAS as a Restricted Foreign Scheme. Shares of the Fund may only be offered to institutional and accredited investors (as defined in the Securities and Futures Act (Cap.289)) (‘SFA’) and this material is limited to the investors in those categories.