The Animal Spirits Of Chinese Equities

But no plan survives contact with the enemy, and China has some pretty big ones, having had to contend with an escalating trade war with the US over the past few years. While Trump is gone, bipartisan hostility to China is a characteristic of US policy and will remain a constraint.  

Chart 1: Top-performing Chinese Equity Funds Over Three Years (%) 

Source: Refinitiv Lipper. Total return to January 31, 2021 

Despite these broad opportunities, UK investments into Chinese equity funds have been rather narrow. Some £1.49bn has flowed into such vehicles over the past three years. That in itself is quite modest, and the bulk of one-year and three–year flows has been taken by just three fund share classes: Baillie Gifford China B Acc (£454m), Allianz All China Equity WT-GBP (£310m), and Ninety One GSF All China Equity JX Inc GBP (£206m) for one year. None of the others across these two classifications have taken more than £100m over the 12 months to January 31. The top three asset gatherers over the past three years look very much the same, and a quick look at flows for the three funds show that all the action has been in the past 12 months.  

The largest funds haven’t been the ones to attract assets over this period, with the three above being outside the top 10 by total net assets—albeit just, in the case of Ninety One.  

The top three-year performer has been none of these (although only the Baillie Gifford fund has a three-year history), but FSSA All China B. Although the fund has almost doubled in size over the past year, it’s from a low base: at £43m it’s a minnow. Despite all the noise over China’s BATs (Baidu, Alibaba, and Tencent), its largest sector is industrials (24.5%). Tencent is a 3% holding, and fairly low down the stock list. 

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