This article is part of Morningstar’s Guide to Investing in Asia where we navigate the potential risks, for the chance of fantastic rewards from across the continent.
Let’s face it; it has been a rocky year for China stocks. But despite the incredible market volatility in the interim, if you had invested in the Shanghai Composite 12 months ago today you would be sitting on a healthy profit. In fact the index of China listed shares has risen from 2,533 to 3,610 – an increase of 42.5%.
Hong Kong listed shares in the Hang Seng index have not done quite as well, falling from 23,893 to 22,652 over the past year. But over a longer term view there too money will have been made.
China is not a market that you speculate in after all, investments there are best made with a long-term view.
It may be the largest economy in the world – China overtook the US as the world's largest economy in 2014 according to the International Monetary Fund – but it is still classified as emerging, which means that your investment climb will be bumpy.
Many argue that in these unpredictable markets active management – which when done well shields investors from losses – is the best option. If that is your view, consider these three funds, top-rated by Morningstar fund analysts. If you prefer a passive approach to investment, remember to balance a China equity ETF or tracker fund with less-risky investments in a well-diversified portfolio.
First State Greater China Growth
This fund holds the highest possible analyst rating – Gold.
Top-notch portfolio manager Martin Lau has led this strategy for more than a decade and brings 19 years of investment experience to the table. In addition to this fund, he manages a number of Greater China and Asia Pacific mandates where he has proved to be an expert investor in the region. He is supported by a sizable Asia Pacific ex-Japan equities team that contributes to an array of successful First State Stewart strategies and is one of the best resourced teams in the region, in the opinion of Morningstar fund analysts.
Allianz China Equity
Allianz China Equity continues to be one of our preferred options for investors seeking China exposure but it is best used as a small slice of a diversified portfolio, says Morningstar fund analyst Grant Kennaway.
Head of Greater China Equities Christina Chung has 25 years of experience in managing Asian equities and has been at the helm for close to a decade. She is a passionate investor who is well-versed in the investment thesis of every stock in her portfolio. Analysts appreciate that she invests in the fund, aligning her interests with investors’.
Please note that this fund is hedged to the US dollar, there is a sterling hedged asset class but it does not carry the Bronze Rating.
Fidelity China Focus
Fidelity China Focus is an attractive equity proposition with a value tilt, says Morningstar analyst Germaine Share.
Portfolio manager Jing Ning took over the fund in November 2013 following former manager Martha Wang’s departure. Ning has 15 years of investment experience, nine of which have been focused on Chinese equities. She has proved a capable manager thanks to her stellar track record on the BGF China fund, which she managed for almost five years at BlackRock.
Please note that this fund is also hedged to the US dollar, there is a sterling hedged asset class but it does not carry the Bronze Rating.
