Press releases
16 January 2012
Chinese New Year: Can the dragon reignite China in 2012?
AIC publish investment companies with highest weightings in China
It’s been a challenging twelve months for China and Asia Pacific focussed investment companies. As Chinese New Year approaches on 23 January 2012, the year of the dragon, it seems fitting that the Chinese consider the dragon unpredictable, although for centuries the dragon has also been considered one of the luckiest signs of the zodiac. Will the year of the Dragon bring a return of fortunes for China?
Those Asia Pacific investment companies which fared the best over the last year tended to have an income bias and a low weighting in China-listed companies, according to Oriel Securities. Indeed Aberdeen Asian Income was the top performing Asia Pacific investment company over the year to 31 December 2011, down just 1%, followed by Aberdeen Asian Smaller Companies, down 8.5% and Schroder Oriental Income, down 9%. Each of these has a relatively low exposure to China (see tables on page 3).
Have commentators been too quick to write off China, which remains the world’s largest economy, and is still experiencing strong growth compared to Western economies? Indeed AIC figures suggest that emerging markets guru Dr Mark Mobius, Manager of Templeton Emerging Markets Investment Trust (TEMIT), has increased the company’s exposure to China by 5%, from 22% a year ago to 27% at 31 December 2011. The Association of Investment Companies (AIC) has published a list of member investment companies with the largest exposure to China and Hong Kong, and has collated manager views on the outlook for China, along with performance figures.
China undervalued?
Howard Wang, Manager of the JPMorgan Chinese Investment Trust said: “We believe that very attractive opportunities exist in the Greater China markets in 2012. This is particularly true for China, which is trading below Global Financial Crisis lows in valuation terms and where earnings revisions have been surprisingly stable despite negative news from around the world. With the recent loosening of liquidity in China, we believe there is an opportunity to recapture gains in stocks and performance lost during the crisis-like atmosphere in 2011.
“We expect markets to remain volatile though the risks of a hard landing in China should ease, supported by more flexible policies given less inflation pressure. We believe the CPI reading will continue to soften in the next few months, while growth could return as China’s policy priority is to ensure social stability as well as a smooth leadership transition.”
Andy Beal, Manager, Henderson TR Pacific Investment Trust plc said: “We’re generally constructive on the Chinese economy in 2012. Inflation has been the main preoccupation of Chinese policymakers over the last 18 months and we expect a sharp drop in headline inflation rates in the coming months. Economic growth is also slowing, mainly as a result of government tightening measures to control inflation and the property market in 2010/2011.
“Lower growth and inflation will allow easier policy and is likely to be positive for the Chinese equity markets particularly given their sharp underperformance since the tightening cycle began in mid-2010. We do not subscribe to the view that China faces an imminent economic Armageddon. There are undoubtedly some significant structural issues facing the economy, which is to be expected in a country that is still heavily influenced by State planning and has only partially transitioned towards a more market led economic model. We expect steady progress to address these structural issues and believe that the government retains significant fiscal and monetary fire power to move aggressively to protect the economy from the impact of the Eurozone crisis or a weaker US economy.”
Andrew Gillan, Manager, Edinburgh Dragon Trust plc said: "It has become clear that almost nowhere is immune from the debt problems in Europe and the US. Until real progress is made by politicians in the West, Asian markets including China could well remain weak. In China's case poor performance these past two years has followed tighter domestic money, the market being driven more by liquidity than fundamentals.
"Whether this weakness persists depends now on the authorities' ability to engineer a soft landing. Slower land sales and souring loan books are evidence that the property boom is over. Battered export markets make the slowdown worse. While Beijing has room to stimulate if need be, the climate for earnings has worsened and mainland valuations are not compelling, unlike those in Hong Kong where we find value.
"None of these developments diminish the importance of China to the world economy. On the contrary, China will still be growing strongly compared to Western economies. Its share of world demand in everything from commodities to capital goods is so large that other economies' dependency on it will only increase.”
Mark Mobius, Manager, TEMIT, said: “With a consumer base of 1.3 billion people, consumerism thus has been flourishing in China. Foreign direct investment continues to grow as international investors remain attracted to China's booming economy. Its foreign reserves are also the largest in the world, making it less vulnerable to external financial shocks.
“China remains one of the fastest growing major economies in the world. During the last quarter, inflationary pressures continued to ease and the industrial sector continued to record strong growth. In January 2011, China started allowing its domestic companies to use the renminbi for overseas investments. That was regarded as the next step in a series of measures that China has put in place over the past few years to internationalise the renminbi. Despite global reservations stemming from China’s status as a developing country and its cautious approach to monetary policy, it is very possible that the renminbi could become a global reserve currency by 2020. If that occurs, it would further cement China’s prominence on the global economic stage. The renminbi might potentially replace the role of the Japanese yen, given that its usage was driven by Japan’s former economic dominance.”
AIC Member Investment Companies with highest weightings in China/ Hong Kong (at 31/12/11)
|
Investment Company
|
Sector
|
China % exposure
|
Hong Kong % exposure
|
Total
|
|
Fidelity China Special Situations
|
Country Specialists: Asia Pacific
|
45
|
48
|
93
|
|
JPMorgan Chinese
|
Country Specialists: Asia Pacific
|
56
|
19
|
75
|
|
Henderson TR Pacific
|
Asia Pacific - Excluding Japan
|
36
|
8
|
44
|
|
INVESCO Asia
|
Asia Pacific - Excluding Japan
|
15
|
23
|
38
|
|
Fidelity Asian Values
|
Asia Pacific - Excluding Japan
|
20
|
16
|
36
|
|
Pacific Horizon
|
Asia Pacific - Excluding Japan
|
21
|
15
|
36
|
|
JPMorgan Asian
|
Asia Pacific - Excluding Japan
|
25
|
9
|
34
|
|
Edinburgh Dragon
|
Asia Pacific - Excluding Japan
|
8
|
25
|
33
|
|
Aberdeen New Dawn
|
Asia Pacific - Excluding Japan
|
5
|
21
|
26
|
|
Impax Asian Environmental Markets
|
Asia Pacific - Excluding Japan
|
|
33
|
33
|
|
Henderson Far East Income
|
Asia Pacific - Excluding Japan
|
17
|
11
|
28
|
|
Schroder AsiaPacific
|
Asia Pacific - Excluding Japan
|
4
|
23
|
27
|
|
Aberdeen All Asia
|
Asia Pacific - Including Japan
|
5
|
18
|
23
|
|
Scottish Oriental Smaller Companies
|
Asia Pacific - Excluding Japan
|
14
|
9
|
23
|
|
JPMorgan Emerging Markets
|
Global Emerging Markets
|
12
|
10
|
22
|
|
Templeton Emerging Markets
|
Global Emerging Markets
|
|
27
|
27
|
|
Martin Currie Pacific
|
Asia Pacific - Including Japan
|
|
20
|
20
|
|
Utilico Emerging Markets
|
Global Emerging Markets
|
1
|
18
|
19
|
|
Pacific Assets
|
Asia Pacific - Excluding Japan
|
1
|
17
|
18
|
|
Advance Developing Markets
|
Global Emerging Markets
|
14
|
2
|
16
|
|
Aberdeen Asian Smaller Companies
|
Asia Pacific - Excluding Japan
|
|
16
|
16
|
|
Establishment Investment Trust
|
Global Growth
|
|
16
|
16
|
|
Schroder Oriental Income
|
Asia Pacific - Excluding Japan
|
3
|
16
|
16
|
|
Edinburgh Worldwide
|
Global Growth
|
15
|
|
15
|
|
Scottish Mortgage
|
Global Growth
|
15
|
|
15
|
|
Aberdeen Asian Income
|
Asia Pacific - Excluding Japan
|
5
|
10
|
15
|
Investment companies with highest weightings in China/ Hong Kong – performance (share price total return on £100)
|
Duration (Years)
|
|
1
|
3
|
5
|
10
|
|
Average investment company Ex VCTs
|
|
88.39
|
147.68
|
100.80
|
192.40
|
|
Weighted Average
|
Asia Pacific - Excluding Japan
|
81.51
|
176.42
|
153.2
|
346.95
|
|
Weighted Average
|
Asia Pacific - Including Japan
|
83.09
|
134.9
|
113.21
|
218.81
|
|
Weighted Average
|
Country Specialists: Asia Pacific
|
64.37
|
143.18
|
74.08
|
426.8
|
|
Weighted Average
|
Global Emerging Markets
|
80.27
|
169.52
|
163.73
|
517
|
|
Weighted Average
|
Global Growth
|
88.45
|
134.73
|
106.37
|
175.38
|
|
Aberdeen Asian Income
|
Asia Pacific - Excluding Japan
|
99.15
|
181.44
|
185.39
|
|
|
Aberdeen Asian Smaller Companies
|
Asia Pacific - Excluding Japan
|
91.51
|
251.81
|
194.49
|
767.65
|
|
Aberdeen New Dawn
|
Asia Pacific - Excluding Japan
|
78.33
|
183.5
|
144.66
|
469.67
|
|
Edinburgh Dragon
|
Asia Pacific - Excluding Japan
|
83.16
|
173.53
|
166.66
|
391.21
|
|
Fidelity Asian Values
|
Asia Pacific - Excluding Japan
|
82.28
|
172.5
|
157.1
|
312.06
|
|
Henderson Far East Income
|
Asia Pacific - Excluding Japan
|
79.72
|
148.01
|
142.55
|
326.98
|
|
Henderson TR Pacific
|
Asia Pacific - Excluding Japan
|
74.12
|
152.83
|
129.8
|
262.68
|
|
Impax Asian Environmental Markets
|
Asia Pacific - Excluding Japan
|
55.94
|
|
|
|
|
INVESCO Asia
|
Asia Pacific - Excluding Japan
|
86.44
|
166.55
|
161.36
|
308.69
|
|
JPMorgan Asian
|
Asia Pacific - Excluding Japan
|
73.9
|
139.61
|
123.72
|
262.82
|
|
Pacific Assets
|
Asia Pacific - Excluding Japan
|
81.89
|
158.24
|
122.89
|
255.5
|
|
Pacific Horizon
|
Asia Pacific - Excluding Japan
|
82.85
|
170.56
|
119.46
|
405.33
|
|
Schroder AsiaPacific
|
Asia Pacific - Excluding Japan
|
90.27
|
186.93
|
158.93
|
387.02
|
|
Schroder Oriental Income
|
Asia Pacific - Excluding Japan
|
90.94
|
232.75
|
171.38
|
|
|
Scottish Oriental Smaller Companies
|
Asia Pacific - Excluding Japan
|
84.06
|
254.42
|
209.2
|
601.93
|
|
Aberdeen All Asia
|
Asia Pacific - Including Japan
|
82.69
|
157.91
|
125.06
|
232.02
|
|
Martin Currie Pacific
|
Asia Pacific - Including Japan
|
84.86
|
124.76
|
108.01
|
261.63
|
|
Witan Pacific
|
Asia Pacific - Including Japan
|
81.72
|
137.75
|
114.25
|
206.79
|
|
Fidelity China Special Situations
|
Country Specialists: Asia Pacific
|
59.75
|
|
|
|
|
JPMorgan Chinese
|
Country Specialists: Asia Pacific
|
67.38
|
127.03
|
120.54
|
230.04
|
|
JPMorgan Emerging Markets
|
Global Emerging Markets
|
81.35
|
164.35
|
141.43
|
472.7
|
|
Templeton Emerging Markets
|
Global Emerging Markets
|
79.28
|
201.81
|
181.17
|
557.54
|
|
Utilico Emerging Markets
|
Global Emerging Markets
|
90.38
|
175.77
|
138.34
|
|
|
Edinburgh Worldwide
|
Global Growth
|
77.47
|
158.28
|
101.83
|
140.22
|
|
Establishment Investment Trust
|
Global Growth
|
89.52
|
151.97
|
109.91
|
|
|
Scottish Mortgage
|
Global Growth
|
81.88
|
167.79
|
120.76
|
203.09
|
- Ends -
Follow us on Twitter @AICPRESS
Notes to Editors
- Performance figures are to 31 December 2011 and are mid-market share price with net income reinvested and a 3.5% deduction for charges, stamp duty and market spread. Source: AIC using Morningstar.
- Geographic weightings are from the AIC’s Monthly Information Release and are to 31 December 2011.
- Discrete annual % returns – share price total return on £100 less 3.5% for charges:
|
Performance From
|
31/12/2010
|
31/12/2009
|
31/12/2008
|
31/12/2007
|
31/12/2006
|
|
Performance To
|
31/12/2011
|
31/12/2010
|
31/12/2009
|
31/12/2008
|
31/12/2007
|
|
Duration (Years)
|
1
|
1
|
1
|
1
|
1
|
|
Aberdeen Asian Income
|
99.15
|
126.12
|
135.11
|
93.45
|
101.82
|
|
Aberdeen Asian Smaller Companies
|
91.51
|
161.18
|
158.97
|
75.18
|
95.68
|
|
Aberdeen New Dawn
|
78.33
|
131.68
|
165.68
|
68.45
|
107.25
|
|
Edinburgh Dragon
|
83.16
|
128.42
|
151.32
|
74.68
|
119.75
|
|
Fidelity Asian Values
|
82.28
|
114.61
|
170.33
|
60.96
|
139.12
|
|
Henderson Far East Income
|
79.72
|
115.18
|
150.11
|
75.12
|
119.39
|
|
Henderson TR Pacific
|
74.12
|
118.63
|
161.86
|
61.35
|
128.91
|
|
Impax Asian Environmental Markets
|
55.94
|
114.87
|
|
|
|
|
INVESCO Asia
|
86.44
|
119.94
|
149.61
|
70.24
|
128.46
|
|
JPMorgan Asian
|
73.9
|
123.03
|
142.99
|
60.23
|
137.01
|
|
Pacific Assets
|
81.89
|
114.94
|
156.54
|
50.29
|
143.79
|
|
Pacific Horizon
|
82.85
|
115.63
|
165.79
|
47.16
|
138.31
|
|
Schroder AsiaPacific
|
90.27
|
120.02
|
160.67
|
60.09
|
131.76
|
|
Schroder Oriental Income
|
90.94
|
130.69
|
182.36
|
57.4
|
119.45
|
|
Scottish Oriental Smaller Companies
|
84.06
|
146.75
|
192.08
|
71.32
|
107.37
|
|
Aberdeen All Asia
|
82.69
|
123.72
|
143.75
|
66.79
|
110.42
|
|
Martin Currie Pacific
|
84.86
|
120.55
|
113.56
|
66
|
122.15
|
|
Witan Pacific
|
81.72
|
125.2
|
125.37
|
70.71
|
109.24
|
|
Fidelity China Special Situations
|
59.75
|
|
|
|
|
|
JPMorgan Chinese
|
67.38
|
112.65
|
155.84
|
65.27
|
135.37
|
|
JPMorgan Emerging Markets
|
81.35
|
122.46
|
153.63
|
62.11
|
129.02
|
|
Templeton Emerging Markets
|
79.28
|
124.91
|
189.76
|
57.1
|
146.41
|
|
Utilico Emerging Markets
|
90.38
|
128.67
|
140.75
|
51.27
|
142.97
|
|
Edinburgh Worldwide
|
77.47
|
122.86
|
154.84
|
55.4
|
108.15
|
|
Establishment Investment Trust
|
89.52
|
113.75
|
138.97
|
67.27
|
100.11
|
|
Scottish Mortgage
|
81.88
|
129.21
|
147.7
|
53.4
|
125.52
|
- The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed ended investment companies, incorporating investment trusts and other closed ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help Members add value for shareholders over the longer term. The AIC has 343 members and the industry has total assets of approximately £90.7 billion.
Back to top
Back to Press releases
