Unlocking China's true potential
The onshore equity market of the world’s second largest economy is deep and liquid. It is also dominated by sentiment-driven retail investors, making it an ideal hunting ground for active, long-term investors.
We have been investing in Chinese equities since 1992. Our stable, experienced on-the-ground team combines local insights with fundamental research. In doing so, the team aims to target and invest in high-quality, well-governed companies with strong balance sheets and clear competitive advantages. We also fully integrate environmental, social and governance (ESG) analysis in our investment process and actively engage managements to improve corporate performance.
High conviction portfolios
Through active stock selection, we build concentrated portfolios that tend to deviate significantly from the MSCI China A Onshore Index and have low correlation to global markets. Careful construction and rigorous risk management mean our portfolios are well equipped to provide resilience during periods of market stress. Our active approach also affords us flexibility to react quickly to investment opportunities when markets are volatile and dispersions increase.
Structural growth opportunities
Our A-share portfolios reflect the long-term structural growth themes we see in China amid continued urbanisation and a rising middle class. We therefore anticipate increasing domestic demand for high-end food and beverages, health care, insurance and wealth management. In addition, there are areas experiencing increased demand amid changing work patterns and online activity due to Covid-19. These include cloud computing, gaming and food delivery.
Our ESG approach to equity investing
We believe that environmental, social and governance (ESG) factors are financially material and can impact a company’s performance – either positively or negatively. Understanding ESG risks and opportunities, alongside other financial metrics, is therefore an intrinsic part of our research process.
The world is evolving rapidly in the current Covid-19 crisis and ESG factors will be more important than ever. We believe companies that take a wider view of their responsibilities, including all stakeholders – such as employees, customers and suppliers – are more likely to succeed.
We actively engage with the companies in which we invest, sharing insights and encouraging best practice where possible. We combine information from these meetings with the insights of our investment managers, ESG equity analysts and central ESG Investment team. This comprehensive approach means we can build a richer, more holistic view of each company. It also means we can consistently evaluate one company against another.
This approach is all part of our responsible stewardship of our clients’ assets – helping us mitigate risks, unlock opportunities and enhance long-term returns.
Read our Research
Why should you care about Chinese onshore equities? How do you invest? Is investing in so-called ‘A-shares’ worth the risks? China’s Local Equity Market: ‘…How and Where and Who’, a companion piece to China’s Bond Market: ‘What and Why and When…’, seeks to answer these questions.
We look at what the A-share market is, who the players are and the factors that drive the market. We show how foreign investor access has improved over the years. We also examine the risks that demand an active investment strategy based on rigorous research.
For investors looking for a deeper understanding, we employ our proprietary analytical framework to generate a 10-year outlook for investment returns. We also dig deeper into the small but important improvements in corporate governance. These show how efforts to make this market more professional are bearing fruit.
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