Rediscover China equity funds (Fund Digest January 2023)

Updated

Mar 2025

published

Feb 2023

Fund Digest

China

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Is China now worth another look?

After about three years of isolation due to the pandemic, China ended its zero-Covid policy in December 2022 and reopened its borders in January 2023. Leisure and business travel has resumed, and people are adjusting to life in the “new normal”. Markets welcomed the reopening with open arms — Chinese equity and fixed income markets made a V-shaped bounce, and the upbeat sentiment also spread into the broader Asian and emerging-market regions.

Chart: Growth of $100 from 1 July 2022 to 13 Feb 2023, based on the MSCI China, AC Asia ex Japan, and Emerging Markets indices

In January, the MSCI AC Asia ex-Japan Index, which captures large and mid-cap stocks in Asian markets such as Hong Kong, Singapore, China, and India, rose 5.32% from a month ago. Similarly, the MSCI China Index increased by 11.72% from the previous month.

This pleasant surprise in the markets has nudged commentators to raise their growth forecasts for China in the Year of the Rabbit. Estimates suggest that China could grow more than 6% in 2023, spurred by recovering domestic consumption and the following investment rebound. Chinese policymakers, recognising the need to restore investor confidence, have also introduced measures to support key growth sectors.

Nonetheless, even as the markets rebound rapidly, valuations of Chinese equities remain attractive, reflecting a compelling entry point for long-term investors.

As the chart below shows, the MSCI China Index price-to-book (P/B) ratio — which measures the price relative to the book value of the stocks that make up the benchmark index — remains relatively low despite the recent rebound. The P/B ratio is hovering around 1.45 times as of end January. Historical data shows that if you enter the market at P/B ratios of 1.35-1.55 times, you are likely to obtain an annualised return of 10.8% after five years.

Chart: Stock valuations remain attractive in China with high return potential; MSCI China Index p/b ratio and 5-year CAGRI

Against this backdrop, we would like to take the opportunity to highlight a selection of China-themed funds on the Endowus Fund Smart platform.

Spotlight on China-focused funds

Fund name, ISIN	Exposure	Why it's worth a look	Fund-level fees after Cashback*
T. Rowe Price China Evolution Equity Fund SGD: LU2351347302 USD: LU2187417386 Available funding source: Cash	Greater China	• Differentiated mandate of investing in high-quality Chinese companies beyond the 100 largest mega cap stocks • Unique small and mid-cap (SMID) tilt acting as a good diversifier to use along with other China strategies	0.935%
JP Morgan China A-Share Opportunities Fund SGD: LU1655091616 USD: LU1255011170 Available funding source: Cash, SRS	China A-Shares	• Taps into China’s new economy growth story with a focus on tech and consumer sectors • Favourable upside capture and controlled downside capture, resulting in top-class risk-adjusted returns	1.15%
First Sentier FSSA Regional China Fund SGD: SG9999000194 Available funding source: Cash, SRS, CPF	Greater China	• Tested and proven track record, having been incepted in 1999 • Contrarian approach with a focus on quality companies • Balanced exposure to China, Hong Kong, and Taiwan, with low correlation to peers	0.88%
Schroder ISF Greater China Fund SGD (Cash): LU2289885027 SGD (CPF): LU1317429246 Available funding source: Cash, CPF	Greater China	• Concentrated, quality-focused portfolio with higher octane characteristics • Strong alpha generation and risk-adjusted returns within its Greater China peer group	0.95%
Allianz All China Equity Fund SGD: LU1794554557 USD: LU1835929800 Available funding source: Cash, SRS	All China	• Exposure to a wide universe, including high-profile US-listed Chinese companies in the communications and consumer sectors • Displays the most growth and large-cap characteristics among other featured China funds	1.375%
Aberdeen Standard SICAV I - China A Share Sustainable Equity Fund SGD: LU1820825898 Available funding source: Cash, SRS	China A-Shares	• Plays on the trend of rising affluence in China which leads to fast growth in premium consumption • Concentrated portfolio of high-conviction, high-quality stocks in defensive sectors such as consumer staples, industrials, and financials	1.125%

Note: SRS funding and CPF funding are only available for SGD share classes.
*Where a fund has both SGD and USD share classes, the fees of the SGD share class are shown. Fund-level fees after Cashback on trailer fees include the fund's total expense ratio (TER) and the trailer fee rebate, but do not include the all-in Endowus Fee.

Flowchart: China equity funds. A simple quiz to find out which China equity investment fund might suit you

For a quick overview of all the funds available on Endowus Fund Smart, refer to our investment funds list here.

Customise your ideal investment portfolio in minutes with Fund Smart. The Endowus Fee for Single Fund Goals via Fund Smart (Cash, CPF, and SRS) is 0.3% p.a., reinforcing our commitment to reduce the cost of investing. This pricing means that more than 95% of the funds are now cheaper on Endowus than on any other fund platform, bank, private bank, financial advisor, or broker in Singapore.

Not sure how to invest with Fund Smart? Find out everything you need to know in our FAQs. If you wish to invest in an accredited investor-only (AI-only) fund or a non-SGD fund, please contact support@endowus.com.

Prefer to leave the fund selection to the experts? Consider the Endowus China Equity Satellite Portfolio, which has been optimised by the Endowus Investment Office to achieve the best balance of China equity funds in a single portfolio. Check it out here.

Understanding onshore and offshore China securities

Before investing in the Chinese markets, it’s a good idea to understand the differences between A-Shares, Greater China, and All China stocks.

Chinese equities can be broadly divided into two categories: the onshore market and the offshore markets.

The onshore market typically refers to the Shanghai and Shenzhen Stock Exchanges, and stocks that trade on these exchanges are commonly known as China A-Shares. There tends to be high participation from retail investors, which makes it relatively volatile and unsophisticated. Given this so-called “market inefficiency”, the onshore market has been a favourite for active institutional investors to leverage their sophisticated insights to generate alpha. This is especially so ever since China A-Shares were made accessible to foreign investors in 2015.

Investors in the Chinese onshore market may also face the direct consequences of government regulations — bringing about risks and opportunities in various sectors such as real estate, technology, electric vehicles, and renewable energy.

The offshore markets include not only the Greater China markets — such as Hong Kong, Taiwan, and Macau — but also Chinese-domiciled companies listed elsewhere in the world, such as the US bourses or even the Singapore Exchange (SGX).

What are the differences between China A-Shares, Greater China, and All China?

	China A-Shares	Greater China	All China
Listing location:	Onshore stock exchanges: Shanghai or Shenzhen	Markets with Chinese cultural ties: Hong Kong, Taiwan, Macau, and China A-Shares	Chinese companies listed globally, including Greater China, the US, and even Singapore or Europe
Key characteristics:	• Largest universe by number of companies • High participation from retail investors • Directly subject to regulatory risks and opportunities	• Previously more accessible and popular, before China A-Shares were opened to foreign investors • Arbitrage opportunities: room to obtain better valuations for dual-listed companies. For instance, if a company is listed on both onshore and offshore exchanges, the onshore stock may see higher valuations due to participation from retail investors.
Key sectors:	A balance of new economy and structural growth industries: consumer, IT, healthcare, materials, industrials	Tech-dominated (especially in the US and Hong Kong) in terms of market cap, but also feature traditional industries such as energy, utilities, and real estate Region-specific favourites include: • HK: conglomerates, financials • US: internet, education, travel • Taiwan: semiconductors • Macau: gaming

Source: Endowus Research, AllianzGI, JPMorgan Asset Management, Neuberger Berman, Schroders

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