Liontrust China Fund

Q4 2020 review

The Liontrust China Fund returned 8.7% over the fourth quarter, compared to 10.5% from the IA China/Greater China sector and 5.2% from the MSCI China Index*^.

 

This quarter, the economic growth recovery in China continued and, with the virus still largely contained, the Chinese market returned 5.2%. Consumption continued its path towards pre-Covid levels with retail sales growth remaining positive throughout the quarter. Manufacturing data has also shown continuous expansion and China’s export industries have recovered quite dramatically in recent months as factories accommodated demand that could not be filled by other countries that were still in lockdown. In contrast, the US, Europe and many other countries around the world are still attempting to constrain new outbreaks including those of the more contagious new strain. Despite this, global markets were driven higher after news of successful vaccine trials provided hope of a faster return to normalcy.

 

Strong performance relative to the MSCI benchmark was supported by the renewables exposure in our portfolio, which continued to benefit from President Xi’s announcement of China’s goal to be carbon neutral by 2060, as well as new targets announced for wind and solar power expansion. Baidu, an internet search engine provider, also had a strong quarter as search and feed advertising stabilised and following indications of plans to leverage its autonomous driving expertise to enter the fast growing EV space. Our sportwear names also continued to perform well following successful inventory management and as consumer confidence and health awareness increases.

 

This quarter, we further added to our positions in the renewables industry following increasingly ambitious climate targets from the Chinese government; we added a solar glass manufacturer and increased our weighting in a wind power generator. We also initiated positions in a leading e-commerce provider which we believe should benefit from emerging group purchasing trends, as well as an online video streaming service which we believe will benefit from popularity among younger generations with a high propensity to spend. These were funded by reductions in our telecoms and financials positions. We also reduced our holdings in the real estate space after increased regulation around lending and debt in the sector, which we believe will create headwinds going forward.  

 

China’s economic recovery continues to lead the rest of the world and we expect this to continue in the short term. Industrial activity has already largely recovered, and the consumer space continues to show good progress. Second wave risks remain, however the government has very effectively handled new outbreaks so far with renewed lockdowns and widespread testing. China’s medium-term policy outlook will be outlined in March with the government’s announcement of the next five-year plan; we believe some emphasis will be placed on self-sufficiency and the climate agenda. Vaccine rollout should provide additional economic impetus as lockdowns are gradually lifted across the globe. US-China tensions have recently increased as the Trump presidency draws to a close, this has increased volatility for targeted stocks, however we believe this may ease in the short term as President Biden takes office and implements a different approach to the relationship with China.

 

Discrete years' performance (%)**, to previous quarter-end:

 

 

Dec-20

Dec-19

Dec-18

Dec-17

Dec-16

Liontrust China C Acc GBP

26.5

17.0

-14.6

33.1

18.1

MSCI China

25.5

18.7

-13.8

40.7

20.4

IA China/Greater China

33.5

22.2

-14.2

35.9

18.5

Quartile

3

4

4

3

2

 

*Source: FE Analytics as at 31.12.20

 

**Source: FE Analytics as at 31.12.20

 

For a comprehensive list of common financial words and terms, see our glossary here.

  

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Monday, January 25, 2021, 3:54 PM