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In response to the recent client interest around China’s stock market and the challenging performance year-to-date, we had a conversation with Martin Lau, managing partner and lead portfolio manager to a number of Asia Pacific and Greater China equity strategies.

In this China update for mid-2022, we discuss some recent topics of interest as highlighted by our clients.

In the first article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, shares his reflections on the past three decades of investing in China markets as the strategy celebrates its 30th anniversary this year.

Despite China being the first country to face the challenges of Covid, early optimism around its control over the virus seems to have waned.

Once again, 2021 was a year full of surprises and challenges, with ongoing Covid disruptions and China turning from a global outperformer to underperformer.

President Xi Jinping has pledged to peak China’s carbon emissions by 2030, then for the country to reach carbon neutrality by 2060. We believe these goals are likely to feature heavily in China’s policy planning.

After Chinese stocks rallied upon the abrupt end to pandemic lockdowns in late 2022, pessimism has taken hold of the markets again. This time, concerns include the uneven post-Covid recovery, the lack of stimulus and weak external demand.

In the second article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, discusses the importance of keeping a long-term mindset and valuation discipline as the strategy celebrates its 30th anniversary this year.

In the final article of this three-part series, Martin Lau, managing partner and lead portfolio manager of the FSSA China Growth strategy, discusses the importance of keeping a long-term mindset and valuation discipline as the strategy celebrates its 30th anniversary this year.

While the pandemic is still far from over, a number of key leading indicators point to a healthy and broad-based recovery in China. Industrial production, trade activity and retail sales have been strong; and in stark contrast to the lockdowns and travel restrictions in early 2020, domestic travel, tourism and the leisure sectors in China have sprung back to life.

How will US-China trade relations affect companies in the portfolio in the long term? Should it be seen as a long-term headwind or could it be beneficial for Chinese companies?

Following on the FSSA China Growth strategy’s 30th anniversary, we sat down with our China portfolio managers Martin Lau, Winston Ke and Helen Chen to respond to recent questions from investors. In this Q&A, they discuss market valuations, inflation, geopolitics and recent company visits.

What will 2021 look like for China? 2021 will be a year of recovery. This is not surprising given last year’s economic downturn. If vaccines are being rolled out gradually during the year, we believe the economy will recover, especially those sectors that have been hit hard like travel.

Given its size and influence, China remains a key investment destination despite ongoing trade disputes and diplomatic tensions with the US and Australia. With a GDP equivalent to around 70% of the United States, many global portfolios continue to feature Chinese equities.

China equities have rebounded sharply since early November as the Covid Zero policy drew to a close. If we look back over the past decade, the last two years presented the most difficult stretch for us as China equity investors.

China made headlines for watering down coal reduction targets during COP26, but we think the criticism is unfair.

Firstly, regulations are nothing new — it has always been a part of the investment equation. If we look at Hong Kong or Singapore for example, the government would introduce new regulations on the property market from time to time;

The pandemic has accelerated certain long-term shifts in consumer behaviour, such as using more online orders for everything from clothing to food. The latest battleground appears to be groceries, but the disrupter emerged from a not-so-new technology — WeChat groups.

What is your view on the tightening regulations on Chinese tech companies? What are the impacts on the companies in the holdings (Tencent, Alibaba, JD.com) and do you see it as a structural headwind for the sector or an accumulation opportunity?

Learn about investing in Greater China equities with FSSAIM today. Our China, Hong Kong and Taiwan investment strategies aim to achieve sustainable, long term growth.

FSSA Investment Managers has been investing in Asia and global emerging markets for three decades.

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