Ninety One, previously Investec Asset Management, has announced the launch of the Global Strategy Fund – China A Shares Fund, as part of the Luxembourg-domiciled GSF range.
The Fund is a best ideas approach investing primarily in Chinese equities listed onshore with offshore flexibility. It comprises a high conviction adaptable portfolio, both style and size agnostic. Managed by Greg Kuhnert and Wenchang Ma and an experienced Asia team, the Fund uses Ninety One’s 4Factor consistent and repeatable evidence-based investment process. Ninety One has a proven track record managing dedicated All-China and Asia strategies, with experience in Chinese equities since 1999.
As first in and out of the crisis, China is leading the rest of the world in recovery from COVID-19 on both an economic growth and earnings perspective. Consensus earnings revisions are trending downward, but China is expected to be more resilient than its global peers, particularly in the onshore A-share market. For the MSCI China A Onshore index, consensus is forecasting 10% EPS growth for the current year and 17% EPS growth for next year[1].”
With their typically greater domestic focus, China A-shares have outperformed emerging market and offshore peers through the crisis and beyond, supported by abundant liquidity and sentiment. In recent months, market velocity, a measure of the frequency of trading, is rising, which is a sign of high retail investor participation in this market. This indicates the inherent behavioural biases that exist in retail-dominated equity markets, leaving scope for active investors to capture mispriced opportunities and generate alpha.
For international investors, access is becoming more possible. China’s capital markets are opening up to foreign capital and A-shares are gaining increasing representation in global indices. With the 20% inclusion of China A shares last year, China’s constituents’ total weight increased to 41% of the MSCI Emerging Market Index[2]. In July 2020, MSCI announced plans to launch a series of thematic indices based on China’s A-share market, seeking to capture those companies that may be impacted by emerging macroeconomic, geopolitical or tech trends.
This growing interest in the A-share market is also reflected in the number of A-share IPOs almost doubling over the past year[3]. Given China’s series of capital market reforms[4] in an attempt to facilitate this, IPOs are expected to keep accelerating this year and beyond, offering a further opportunity to tap into this expanding universe.
Wenchang Ma, Portfolio Manager at Ninety One said: “We are seeing strong demand from investors to allocate to China as the country opens its capital markets and to access the breadth of the opportunities available in the A-share market. We are focused on selecting good quality companies that are showing favourable operating and share price momentum, trading at attractive valuations. We believe this is the best way to generate alpha over the long run.”
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