Investment Philosophy

We believe that inefficient and immature Chinese markets, coupled with unique local issues and domestic market sentiment, can reward active investment management, particularly in more opaque, fledgling market environments.  Sparse research coverage and the subsequent pricing anomalies this creates can lead to attractive opportunities for experienced professional investors.
 
China is a market where top-down analysis should take precedence at both the macro and industry level. The J.P. Morgan Greater China Team’s investment approach involves in-depth analysis of macro factors, such as government policies, economic data, commodity prices and supply/demand dynamics. The results of this analysis serve as the building blocks for the team’s sector and industry views.  The team debates these views with industry and business leaders, which, in turn, helps identify companies poised for long-term success with attractive returns on equity.
 

Investment Process

In addition to the top-down analysis discussed above, stock selection is an important part of the team’s investment process. In general, the team covers about 75% to 80% of the investable China A Share benchmark universe and updates these stock views on a weekly basis.  On average, the team conducts 100 company visits per fund manager per year.  The stock selection process is largely country specific, which means individual country specialists have the responsibility to design and refine their stock selection process to cope with the dynamic local factors and market conditions. Apart from analyzing the impact of macro factors, such as government policies and economic data on individual stocks, there are also several common factors that the country specialists always focus on including: competitive dynamics, industry structures, cyclicality and evolution, growth at a reasonable price, corporate governance, and liquidity.
 
In addition to focusing on stock selection, the J.P. Morgan Greater China Team has a disciplined portfolio construction process that captures and preserves value from its high conviction views.  To ensure the portfolio’s active bets appropriately reflect the team’s views on individual industry and stock, the active positive/negative bets will normally range from 75 to 600 bps. The strategy typically holds between 60 to 90 positions, which are constantly monitored and traded to actively manage risk and optimize the portfolio.