A multi-income journey into the emerging high-yield potential
Income investors like us have stayed the course as we ride through the four seasons. Where do we see income opportunities?
As the pandemic continues to evolve, China is seeing early signs of economic recovery as number of new infections decline and production resumes. Against this backdrop, what are the opportunities ahead in the view of our Emerging Markets and Asia Pacific (EMAP) Equities Team?
Q1. WHAT IS THE IMPACT OF THE PANDEMIC ON THE CHINESE EQUITY MARKETS?
China loosens monetary policy to support businesses
Source: CEIC, People’s Bank of China, J.P. Morgan Asset Management, China Central Depository & Clearing Co., Shanghai Clearing House. Credit growth to GDP growth ratio utilise rolling 12-month nominal GDP and credit stock. CPI stands for consumer price index and PPI stands for producer price index. *Stock of credit to the real economy, defined as the net total social financing plus government financing. **Wenzhou SME crisis refers to the wave of bankruptcies and funding problems faced by a large number of SMEs in Wenzhou in 2011. ***LGFV refers to local government financing vehicle. Data reflect most recently available as of 31.03.2020.
Q3. WHERE DO YOUR CONVICTIONS LIE FOR THE YEAR AHEAD1?
Q4. IN YOUR VIEW, WHY STAYING INVESTED IN CHINA A-SHARES1?
MSCI A-share inclusion factor rises
Source: Bloomberg, MSCI, World Bank, J.P. Morgan Asset Management. Data reflect most recently available as of 31.12.2019.
GDP: gross domestic product; Market Cap: market capitalisation; EM: emerging markets. *Share of EM GDP is for 2018 and is calculated as Chinese nominal GDP in USD as a percentage of all emerging markets within the MSCI EM index. **Share of EM market cap is for 2018 and is calculated as China’s market capitalisation of listed domestic companies as a percentage of all emerging markets’ capitalisation of listed domestic companies within the MSCI EM index. ***Currently, an index inclusion factor (IIF) of 20% is applied to China A Large Cap, ChiNext Large Cap and China A Mid Cap (including eligible ChiNext shares). 100% A share inclusion is shown for illustrative purposes only.
Past performance is not a reliable indicator of current and future results.
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Conclusion
As the world continues its race to contain the outbreak, market volatility is likely to persist. Nonethesless, China’s long-term structural trends are expected to remain intact, as the economy continues to transform.
Growth-oriented investors seeking quality investments for the long term, based on their investment appetite and objectives, could consider China A-share as an integral part of their portfolios. There are plenty of attractive quality growth opportunities in sectors like healthcare, technology and consumption1. The focus on fundamental research will be key in identifying long-term winner.
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. Source: The World Federation of Exchanges, data as of 31.12.2019.
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.
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.