Growth in focus: finding the ace among A-Shares

Important information
JPMorgan China A-Share Opportunities Fund
The Fund invests primarily (at least 70%) in equity securities issued in the People’s Republic of China (“PRC”) including but not limited to China A-Shares listed on the PRC stock exchanges (e.g. Shanghai Stock Exchange and Shenzhen Stock Exchange). The Fund may also invest in derivative for investment and hedging purposes. The Fund is therefore exposed to risks related to equity, emerging markets, concentration, smaller companies, PRC tax, liquidity and derivatives. The Fund has exposure to the China A-Share market via the Shanghai-Hong Kong Stock Connect and/or Shenzhen-Hong Kong Stock Connect (collectively, the “China Connect”) and/or Renminbi Qualified Foreign Institutional Investor (“RQFII”) quota. Investors will be subject to the risks associated with RQFII, China market, application of RQFII rules, RMB currency, China Connect and investments in stocks listed on the Small and Medium Enterprise Board and/or the ChiNext Board of the Shenzhen Stock Exchange and/or the STAR Board of the Shanghai Stock Exchange risks. RMB is currently not freely convertible and RMB convertibility from offshore RMB (CNH) to onshore RMB (CNY) is a managed currency process subject to foreign exchange control policies of and restrictions imposed by the Chinese government. There can be no assurance that RMB will not be subject to devaluation at some point. Investors may be subject to substantial losses. Investors should not solely rely on this document to make any investment decision.

**JPMorgan China Pioneer A-Share Fund**
The Fund invests primarily (at least 70%) in People’s Republic of China (“PRC”) equity securities, including but not limited to China A-Shares listed on the PRC stock exchanges (e.g. Shanghai Stock Exchange and Shenzhen Stock Exchange). The Fund is therefore exposed to risks related to equity, emerging markets, concentration, smaller companies, PRC tax, currency, liquidity hedging and derivatives. The Fund has exposure to the China A-Share market (including PRC exchange traded stock index futures) via the Shanghai-Hong Kong Stock Connect and/or Shenzhen-Hong Kong Stock Connect (collectively, the “China Connect”) and/or Qualified Foreign Institutional Investor (“QFII”) quota. Investors will be subject to the risks associated with QFII, application of QFII rules, China market, PRC exchange traded stock index futures, PRC brokerage, RMB currency, China Connect and investments in stocks listed on the Small and Medium Enterprise Board and/or the ChiNext Board of the Shenzhen Stock Exchange and/or the STAR Board of the Shanghai Stock Exchange risks. RMB is currently not freely convertible and RMB convertibility from offshore RMB (CNH) to onshore RMB (CNY) is a managed currency process subject to foreign exchange control policies of and restrictions imposed by the Chinese government. There can be no assurance that RMB will not be subject to devaluation at some point. Investors may be subject to substantial losses. Investors should not solely rely on this document to make any investment decision.

Key takeaways:

A number of structural growth trends have been accelerated as China gradually recovers and continues to transform its economy. This has added growth momentum to the China A-Share market.
Among the key growth drivers, domestic technology and healthcare innovation¹ remain on investors’ radar.

The global public health crisis has disrupted economic activity in China but the country’s various industries are gradually recovering with the support of fiscal and monetary policies. As China strives to overcome this challenging situation, renewed geopolitical risk has emerged as another hurdle ahead. With these two economic hurdles, which Chinese sectors could leverage on the growth opportunities accelerated by structural transformation? And which could likely ace the competitive landscape as the strong that could become stronger?

1. New growth opportunities

Healthcare¹

Increased demand for vaccine, diagnostic and testing services and products as the global public health crisis persists.
Only a small portion of China’s population has received vaccines because of the lack of awareness about overall public healthcare and vaccine supply. Nonetheless, the current crisis has sparked near-term demand, and could help increase market penetration of various healthcare-related services and products over the long run.

Technology¹

A large number of people are working or studying from home amid mobility restrictions, creating massive demand for cloud connect, server and memory storage services, as well as enhanced awareness for network security.
These sectors are likely to replace technology hardware industries such as smartphone lenses and become a major driver of China’s technology sector.

2. Seeking import substitution

Healthcare¹

Re-escalating tensions between China and some of its trading partners have accelerated its demand for import substitution, and increased investment in the research and development of Chinese pharmaceuticals.

Technology¹

Demand for corporate software and cloud application services has increased amid a push among corporates for higher efficiency. While addressing local demands, Chinese software companies have also expanded their market share globally.

How are JPMorgan China A-Share Opportunities Fund and
JPMorgan China Pioneer A-Share Fund capturing these opportunities?

1. A Chinese equity portfolio with long-term growth potential

The A-Share market’s diverse sector composition allows the Funds to capture long-term growth opportunities which can be found in sectors with diverse “New China” opportunities. Supported by our Greater China Team’s comprehensive research and local knowledge, our fund managers focus on identifying quality Chinese companies with long-term growth potential.

Compared with their respective benchmarks, our Funds have an overweight view on information technology and healthcare sectors, as of end-May 2020. Both sectors are also the top contributors to the Funds’ year-to-date performance².

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2. Bottom-up stock selection supported by macro insights

Leveraging our on-the-ground research which focuses on company fundamentals, our fund managers integrate bottom-up stock selection with top-down macro and policy views to identify high conviction stock ideas. The Funds adopt an all-cap, high conviction, growth-oriented approach, focusing on a concentrated pool of investment opportunities.

Our China A-Share Capabilities

Greater China experts³

6 portfolio managers
14 research analysts
15 years of experience on average

Coverage⁴

>530 Greater China stocks
Of which >250 are A-Shares

Fund rating⁵

JPMorgan China A-Share Opportunities Fund
JPMorgan China Pioneer A-Share Fund

3. Access to A-Share investing with RMB/USD as base currencies

The JPMorgan China A-Share Opportunities Fund is denominated in renminbi (RMB) with two other share classes – one in Hong Kong dollar (HKD) and one in US dollar (USD) while the JPMorgan China Pioneer A-Share Fund is denominated in USD, offering different choices to investors with different needs.

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Conclusion

As China recovers and continues to transform its economy, this has accelerated the development of structural growth trends such as domestic technology and healthcare innovation¹. A focus on bottom-up fundamental research helps identify quality Chinese corporates which could capture long-term investment opportunities.

This content represents our investment team’s current view and overall strategy provided for information only based on current market conditions not taking into consideration any specific investor’s investment objective and risk appetite. Not to be construed as investment recommendation or advice.

1. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions.
2. Holdings, exposures and allocations for actively managed portfolios are subject to change from time to time. These represents Emerging Markets & Asia Pacific Equities team’s views under current market conditions, subject to change from time to time. Provided for information only, not to be construed as investment advice. Diversification does not guarantee investment return and does not eliminate the risk of loss.
3. Source: J.P. Morgan Asset Management. Data as of 31.05.2020. There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management (JPMAM) will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional's future performance or success.
4. Source: J.P. Morgan Asset Management. Data as of 31.12.2019.
5. Source of Morningstar Analyst Rating: © 2020 Morningstar, Inc. All Rights Reserved. Data as of 31.05.2020.

Investment involves risk. Not all investments are suitable for all investors. Past performance is not a reliable indicator of current and future results. Please refer to the offering document(s) for details, including the risk factors. Investors should consult professional advice before investing. Investments are not similar to or comparable with fixed deposits. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not to be taken as or construed as investment advice. Estimates, assumptions and projections are provided for information only and may or may not come to pass. This document has not been reviewed by the SFC. Issued by JPMorgan Funds (Asia) Limited.

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