Which China funds outperformed in 2020?
As the Lunar calendar moves into the Year of Ox, Money Management explores which are the best-performing China funds over the past year.
There were five funds within the Australian Core Strategies universe which specifically invested in China.
These were Premium China, VanEck Vectors China New Economy ETF, Vasco ChinaAMC China Opportunities, Fidelity China and VanEck Vectors FTSE China A50 ETF (formerly known as VanEck Vectors ChinaAMC CSI 300 ETF).
The best performing of these four funds during 2020 was Premium China which returned 28.6%.
Following this, VanEck Vectors China New Economy ETF returned 26.8%, Vasco ChinaAMC China Opportunities returned 26.3%, and VanEck Vectors FTSE China A50 ETF saw the lowest positive return at 17.9%. However, Fidelity China reported losses of 7.9%.
The performance of the China funds compared to returns by the Asia Pacific ex Japan sector of 20.3% while those funds focused on single Asian countries such as China and India saw lower returns of 12.9%.
Performance of China funds during 2020
In its latest factsheet, manager Premium China Funds Management said performance of the $149 million Premium China had been helped by performance of consumer and e-commerce stocks and currency hedging gains. Its two-largest holdings were two technology firms, 10% in Tencent and 8.6% farming technology company Pinduoduo.
While the majority was held in Hong Kong listed stocks, it also had 22% invested in China A-Shares.
“Our core exposure to e-commerce platforms is expected to maintain its robust growth outlook heading into 2021. Meanwhile our core position in baijiu [a type of alcohol] names continue to enjoy robust demand and price hikes. This month, we also added a leading duty-free operator in China to the portfolio, which contributed significantly during the month,” it said.
“In 2021, Chinese companies are expected to lead growth in Asia. With its recovery ahead of the curve, China’s economic growth will be more robust and balanced between the old and the new economy. After the strong rally in 2020, we continue to prefer a bottom-up stock picking approach and be selective.”
On the other hand, Fidelity, which had a significant overweight to financial stocks such as China Life Insurance and China Construction Bank, said that its underperformance had been caused by its preferred holdings coming under pressure.
“Shares in state-owned telecommunications operator China Mobile declined following weak sentiment towards the wider telecommunications sector. Energy company CNOOC also declined. Both these stocks were negatively impacted by concerns that their shares will be delisted from the US stock exchange as a result of an executive order passed by the Donald Trump administration barring US investors from purchasing shares in companies that have alleged links with the Chinese military,” it said in its most recent factsheet.
Over three years to 31 December, 2020, the best-performing fund was VanEck Vectors China New Economy ETF which returned 78% and VanEck Vectors FTSE China A50 ETF which returned 58% versus returns by the Asia Pacific ex Japan sector of 49%. Fidelity China was the worst-performing fund with returns of only 5.1%,
Performance of China funds over three years to 31 December 2020
AUTHOR
Laura Dew
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