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Fund Profile

JPMorgan China Growth & Income 28 December 2022

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
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Overview

JPMorgan China Growth & Income (LON:JCGI) is focussed on delivering attractive total returns through investment in ‘Greater China’. The portfolio is managed by Howard Wang, Rebecca Jiang and Shumin Huang, who are supported by an extensive team of analysts based in the region. The portfolio is benchmarked against the MSCI China Index, however, the team have given the portfolio a strong tilt towards smaller and mid-sized companies which are aligned to the themes of the ‘new China’ (see Portfolio section).

China has progressed significantly in the past few decades and the team believe that as it closes the gap with the developed world, it will transition towards becoming a more consumption-orientated economy, while also taking on the challenges of reducing carbon emissions. The team believes that government support and stimuli will help drive this transition and they have positioned the portfolio to sectors likely to benefit from these themes, including healthcare, technology and consumer discretionary, as well as renewable energy and the electrification of transport.

The managers have delivered strong outperformance over the past five years, with JCGI beating both the benchmark index and AIC China sector, but the trading conditions in China since the start of the year have made markets challenging. Underweight positions in energy and financials have led to a performance shortfall year to date (see Performance section). JCGI pays an attractive dividend of 4% of the previous financial year-end’s NAV, which is mostly paid from capital. This, therefore, means that the dividend payout can fall, as well as rise, year on year. At the time of writing, JCGI’s discount is 7.8%, having averaged 7.7% over the last five years.

Analyst's View

After a difficult period for Chinese stocks, Howard, Rebecca and Shumin note that their expected return framework for their portfolio over a five-year period is signalling the strongest upside potential it has had in at least a decade. However, they do warn that there are a series of unquantifiable risks connected to geopolitical tensions, regulatory interference and COVID policy which mean that investors need to be cautious and take a long-term view on any investment in China. The team have taken the gearing level to the upper range of JCGI’s mandate, reflecting their views on valuations and upside potential, so any recovery in the market should pay off well for investors and the current discount level could be an attractive long-term entry point.

We believe that China’s continued development towards a more modern economy, as well as the opportunities from the transition to carbon reduction, provides strong long-term investment opportunities, even if in the short term the market has been held back by the government’s miscalculated zero-covid strategy. However, following the recent nationwide demonstrations and unrest, the government has lifted the strictest lockdown measures which raises hope for a quicker path to normalisation. If so, we think the pent-up demand could result in strong recovery potential over the short term and the government’s continued support for key themes and sectors that JCGI is aligned with should support medium to longer-term growth potential.

Bull

  • Large, experienced local team providing potential edge in research into the market
  • Offers predictable 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 significant 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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