Fund Profile

JPMorgan China Growth & Income 16 August 2023

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by JPMorgan China Growth & Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
JCGI’s managers expect handsome long-term returns from their portfolio after last year’s sell-off…
Overview

JPMorgan China Growth & Income (JCGI) asks the managers to focus on the growth part of the equation. They are asked simply to find the best growth prospects in the vast Chinese equity market, while the board pays a Dividend out of capital worth 4% of the previous financial year’s ending NAV.

JPMorgan (JPM) has resources that are second to none in China, with a team of 24 investment professionals specialising in China within their Emerging Markets and Asia Pacific (EMAP) team as well as a team of 20 analysts from CIFM. This is a Shanghai-based fund manager previously run as a joint venture which JPM has now taken full ownership of, deepening its resources and access to the onshore Chinese market.

The EMAP team focus on finding high-quality growth companies, i.e. those that can generate above-market earnings growth sustainably year on year. They aim to look out further than the market to help them add alpha rather than getting caught up in short-term noise.

China has certainly been ‘noisy’ in recent years, with international and domestic issues leading to volatile markets. The overall effect has been for the market to take a serious knock over the past two years (see Performance). Managers Rebecca Jiang and Li Tan argue that this has contributed to the emergence of some excellent long-term opportunities amongst companies which have good long-term prospects and are at undemanding valuations compared to history.

With Chinese equities falling out of favour, JCGI’s shares now trade at an 11.3% discount to NAV, having traded on a premium when sentiment toward China was more optimistic.

Analyst's View

We think JCGI is an attractive way to invest in China for those who want to maximise their chances of gaining long-term growth. The focus on long-term earnings growth when it comes to company selection is a key reason, and another is the team’s use of gearing when they see a valuation opportunity. When we spoke to the team they expressed their optimism about the long-term prospects for their portfolio after a significant sell-off.

We think investors in China need to be prepared to stomach volatility. The market has a track record of displaying volatility, and in the near term, there are a number of risk factors. Domestically the most important is the outlook for the Chinese economy, which is struggling in the aftermath of ditching zero-COVID. While this may not be a key factor for corporate earnings in the long run, it seems likely to drive investor sentiment in the short term. However, JCGI’s shares are available at a significant Discount to NAV, so offer some compensation for those risks and the potential for higher returns when sentiment towards China improves.

Bull

  • Large, experienced local team providing a potential edge in research into the market
  • Offers an attractive dividend, without having to invest in low-growth high-yielders
  • Excellent track record of relative performance

Bear

  • High single-country risk, including political and regulatory risk
  • A highly volatile market, increased by the trust’s tendency to employ gearing
  • Dividend will fall if NAV falls
Continue to Portfolio
2024 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for income & growth... Find out more

Fund History

24 Jan 2024 Share the wealth, Xi...
The world's most successful communist country could benefit from a decent welfare state...
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
16 Aug 2023 Fund Analysis
JCGI’s managers expect handsome long-term returns from their portfolio after last year’s sell-off…
02 Mar 2023 The Devil’s in the demographics
China’s population is in decline - should it turn east or west for inspiration..?
25 Jan 2023 The toad to recovery
Two of our analysts debate the outlook for China in 2023…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
28 Dec 2022 Fund Analysis
JCGI is well-positioned for China’s reopening over the short term and the economy’s transition over the long term…
02 Nov 2022 The stability dividend
Our analysis shows that trusts paying a regular income suffer less discount volatility...
20 Jul 2022 Ingredients for success
We identify several less conventional trusts that offer strong sources of diversification to major indices…
25 May 2022 Bull in a China shop
Chinese stocks are looking cheap, and we argue that now may be a good time to allocate more to China for the long-term...
04 May 2022 Time to change the record
We ask whether equities can still offer meaningful diversification or whether investors need to turn to alternatives…
20 Apr 2022 Fund Analysis
JCGI gears up for the long-term...
05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
13 Oct 2021 Beyond the Middle Kingdom
As momentum falters in the emerging markets powerhouse, we examine the options for investors outside China...
13 Oct 2021 Fund Analysis
JCGI has delivered exceptional long-term performance…
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
10 Feb 2021 Fund Analysis
JCGI offers exciting growth potential from Chinese large and mid-caps with a high and predictable dividend…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
24 Sep 2020 Bull in the Chinese market?
The Chinese stock market has been a notable winner thus far in 2020. Should investors stay the course, or take profits?
17 May 2018 Fund Analysis
JPMorgan Chinese is an actively managed portfolio of stocks listed in China, including Hong Kong, and Taiwan...
17 May 2018 Blast off!
As China A-Shares join the global indices, many investors remain structurally underexposed to this exciting region...
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