It is the time to consider whether reliance on emerging market exposure through indices is sufficient to meet your investment goals and expectations. China’s growth and influence on global markets demands a more considered and deliberate exposure to China, including a direct component.
China is on track to overtake the US as the largest economy in the world within the next seven years. It already boasts the second-largest equity and bond markets globally, with an array of both well-established industry leaders and up-and-coming innovators.
Global investors remain under exposed to China, and with the opportunity set as expansive as the country itself, it’s crucial for international investors to gain the most effective exposure.
China equity markets are split into many different share types, which can be grouped into onshore-listed (mainland China) and offshore-listed (Hong Kong and US) shares. Access for foreign investors to China A shares has been improving following significant regulatory changes. In fact, China recently lifted restrictions entirely for the Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) schemes, integrating both programs into one effective November 2020.
E-commerce growth is driven by the increased penetration of mobile phones and digital technologies, and rising income levels.
Government policies have focused on boosting high-tech production, pivoting from export-oriented and fixed-asset investments (Old Economy) to domestic consumption and tech innovations (New Economy).
The Chinese equities are still subject to high volatility, but regardless of which active approach (fundamental or quantitative) investors choose, buying into companies that possess solid long-term prospects and can deliver earnings growth at an attractive valuation level may help investors capture strong alpha in the China market.
Our goal is to take advantage of market inefficiencies through a bottom-up fundamental analysis.
Chinese companies are increasingly competitive, presenting good investment opportunities. Many have built strong financials and market share on the back of significant and growing domestic consumer demand and increasing international expansion.
Reasonable valuation levels compared to both China’s history and relative to other developed and emerging markets.
Long-term fundamental investing can deliver alpha opportunities as the market is much less efficient than developed markets. The approach focusing on company fundamentals and targeting biases of investor behaviours,have worked well in China over the long term.
Chinese companies are increasingly competitive, presenting good investment opportunities. Many have built strong financials and market share on the back of significant and growing domestic consumer demand and increasing international expansion (e.g. technology and logistics).
Reasonable valuation levels compared to both China’s history and relative to other developed and emerging markets. As the world's 2nd largest economy matures into a consumption and technology based economy, the conditions are ripe for world beating companies to emerge.
China’s A-share market is much less efficient than developed markets, and long-term fundamental investing can deliver strong alpha opportunities.
We are particularly focused on A-shares, as we believe they may present the opportunity for foreign investors. This is due to recent changes in regulation aimed at increasing foreign investor activity in China’s financial markets.
A-shares are the conduit for embracing the development of the domestic Chinese economy; a more consumption orientated model to service a 1.4+ billion population.
Source: Invesco, AUM as of date is December 31, 2020.
Source: Invesco, AUM as of date is December 31, 2020.
Focus on fundamentals-driven research to harvest inefficiency premium over the long term investment horizon.
Idea generation driven by local insights focusing on identifying sustainable growth opportunities.
We are committed to being a responsible investor through four key approaches to incorporating ESG considerations: industry advocacy, investment integration, active ownership and client focus.
Quantitiative strategies systematically apply evidence-based research to help achieve outcomes.
Evidenced by academic research and proven by practitioners, many systematic investing ideas drive returns in the China A share markets. Our quantitative equity team conduct both research and portfolio management duties as an integrated team driving our quanititiatve analysis.
Invesco is one of the largest factor- based managers of ETFs in the world.
Source: Invesco. All data as of 30 September 2020.
35 dedicated researchers teamed with practitioners across regions.
Source: Invesco. All data as of 30 September 2020.
Invesco’s practical expertise managing live portfolios dates back to 1983.
A large investment universe of over 3,700 companies with good liquidity. Much less concentration in industry, market capitalization and styles.
Reasonable and improving data quality and coverage in China makes systematic investing possible.
Evidenced by academic research and proven by practitioners, many systematic investing ideas drive returns in the China A share markets.
The Chinese economy has undergone a dramatic structural transformation in the last five years, shifting from growth via infrastructure spending to present-day, where consumption, services and the “new economy” sectors, such as technology, healthcare and green economy, are the main contributors of the economy.
Chinese technology, ecommerce and internet companies continue to innovate and grow. Hardware manufacturers of 5G technology can also bring value to the supply chain.
Rising demand from China's aging 1.4 billion population. Healthcare is the second largest A-share sector in China with over US$1 trillion in total market capitalization, almost 400 investable stocks and diverse subsectors ranging from biotech to medical devices.
What’s driving growth in China’s biotech industry?
Research firms expect that the mainland biotech market will be worth US$96 billion by 2023. Chris Liu, Senior Portfolio Manager within Invesco’s China A Investments team summarizes some factors driving the growth of this market.
China’s healthcare growth story outshines global peers
From vaccine development to innovative drugs and biotechnology, China’s healthcare companies have been growing strongly, outpacing some of the world’s leading industry players. We explore why one of China’s most diverse and expansive sector, its healthcare industry, is emerging as a growth opportunity.
Could Healthy China 2030 also be a blueprint for investment opportunity?
China’s healthcare sector began privatising in the 1990s, along with the founding of special economic zones based on a famously repeated pledge not to worry about if a cat was white or black so long as it caught mice. Since then, a mostly healthy path of economic growth has played out in China, attracting international capital.
Sectors like electric vehicles and renewable energy will likely benefit as China moves towards carbon neutrality. China is the largest EV user market in the world and maker of lithium-ion batteries. (Source: Forbes. Why China Is Dominating Lithium-Ion Battery Production, 2019)
China’s Renewable Energy Market Outlook
Last month, the Biden administration announced an import ban on certain Chinese solar manufacturers. The move may require US solar panel producers to search for alternative polysilicon sources.
Why China remains a springboard for electric vehicles
The global electric vehicle (EV) market has rapidly recovered from the pandemic-related demand shock. Improving consumer acceptance, falling prices and stricter emission standards has the potential to drive greater adoption and fuel sales growth of both foreign and domestic EVs in China over the next few years.
China to see significant growth in responsible and ESG-themed investment
In this article, we take a detailed look at the top-down drivers of growth in ESG adoption in China and their potential impact in the coming year.
At Invesco, we provide trusted China outcomes with a seamless global experience.
In collaboration with Invesco Great Wall (IGW) - our joint venture and a 1st Sino- American fund management company, Invesco is able to bring unique local insight combining with global practices to our global clients.
Invesco helps IGW build capabilities in active equities, quant equities, fixed income and multi-asset solutions and IGW works closely with Invesco to develop client-centricity, robust risk management and strong compliance practices.
(Invesco Great Wall is a 49% Invesco-owned joint venture.)
Invesco built the first Sino-US fund management joint venture in China with >500 employees across offices in Hong Kong, Shenzhen, Beijing, Shanghai, Guangzhou.
3 decades of experience in China investing. Average of 25 years of industry experience across senior investment leaders.
Source: Invesco, AUM as of date is December 31, 2020.
Source: Invesco, AUM as of date is December 31, 2020.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
