Fund Profile

JPMorgan China Growth & Income 13 October 2021

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 (JCGI) offers investors access to the China growth story via a carefully curated portfolio of companies the managers consider to be the long-term winners in a fast-developing market. The core of the approach is the detailed stock-specific research undertaken by a team of expert analysts who are mostly based in China. They cover large, mid-sized and small companies, including the relatively less well-known onshore A-share market. JCGI’s managers, Howard Wang, Rebecca Jiang and Shumin Huang, have built a portfolio of these best ideas, aiming to generate alpha by taking a longer-term view than their peers and focussing on identifying the best opportunities for earnings growth.

Thanks to this focus on growth, JCGI has delivered excellent long-term absolute and relative returns, as we discuss in the Performance section. JCGI has tended to be more volatile than the market, albeit with gearing a contributory factor. The trust’s NAV has declined more than the market in the recent sell-off, but the managers view this as an opportunity to buy companies on weakness rather than anything more worrying, as we discuss under Portfolio.

JCGI’s portfolio is built for growth, with the Dividend policy committing the board to pay out 4% of the NAV each year, based on the previous year’s closing NAV. This means it offers an attractive dividend from a portfolio with high growth potential.

Following the implementation of the new dividend policy, the trust’s Discount narrowed considerably and JCGI started trading on a premium from early October 2020. However, after the China equity market sell-off in February 2021, the shares have moved out to a discount of c. 10%.

Analyst's View

JCGI offers a powerful combination of growth and income. By paying a dividend partially from capital, the board has freed the manager from the obligation to purchase high-dividend-paying stocks with less attractive growth prospects. As a result JCGI offers the best of both worlds: exposure to sectors and stocks which are low-yielding, but which also have excellent growth potential and are paying an attractive, frequent dividend.

We think the team-based, active strategy is an attractive approach to investing for a long-term investor. We believe it is easier to identify and own winning stocks rather than time the market or tilt a portfolio based on the business cycle. JPMorgan’s extensive resources in China, soon to be boosted by the completion of the purchase of local manager CIFM, puts the trust in a great position.

While the recent sell-off will be unpleasant for investors, this sort of volatility has been typical of an investment in China in recent years, and may well remain so. The managers point out that the valuation of the benchmark index is now below its five-year average, while they do not believe the earnings outlook on their holdings has darkened. We acknowledge it is hard to have conviction on the short-term direction of the Chinese market, with a reasonable probability of regulatory interference in other sectors. However, we believe it likely that if one takes a long-term view, the potential for high risk-adjusted returns in China remains.

bull bear
Large, experienced local team providing potential edge in research into the market
High single-country risk, including political and regulatory risk
Offers predictable dividend, without having to invest in low-growth high-yielders
A highly volatile market, increased by the trust’s tendency to hold gearing
Excellent track record of relative performance
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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