Our investment strategy favours private enterprises. They are highly competitive and innovative, constantly utilising new technologies to deliver market leading products and services. We are positive about their growth as they continue to improve efficiency and productivity. From a corporate governance perspective, we believe that the interests of private enterprises are more aligned with our interests, as investors.
A good example that showcases private enterprises’ agility is a long term holding in a hypermarket. As one of the largest hypermarkets, it’s management reacts timely to capitalise on opportunities within its online operations, in our view. Following an investment by a leading e-commerce platform (late 2017), the company began a digital transformation that ensured that during Covid-19, the company achieved stable revenue thanks to its rising online presence. Meanwhile, we saw similar investment by this e-commerce platform in state-owned enterprises (SOEs) and changes are generally not as fast in these businesses.
In our view, private enterprises are more likely to manage their businesses in the interest of shareholders, and in doing so, take corporate governance seriously. Within our bottom-up stock selection process, we attach a high level of importance to ESG factors.*
Our view has been reflected in our lack of exposure to a leading liquor producer in China. Although the company has achieved strong earnings growth, we were concerned about its corporate governance. The company is indirectly owned by the local government and there have been several high-profile cases that involved senior managers being removed from their posts by the local watchdog. We believe a lack of transparency in distributor selection is an issue for the company.
In conclusion, we are positive towards the domestic economy in China. We like the rising digital trend that is being accelerated by the recent outbreak of Covid-19. In particular, we favour private enterprises thanks to their agility and sound corporate governance. We are positioning the Invesco Greater China Equity Fund to capitalise on our views.
We believe it is important for investors to adopt an all share approach to capture the best opportunities in China. We define this as searching for the best investment ideas across all China‘s share classes irrespective of listing locations. We believe offshore equity markets provide a large selection of opportunities with growth potential, particularly among the consumer, services and technology companies. These are mostly large private enterprises, which were listed offshore as a result of their entrepreneurship and financial strengths. In addition, we see increasing opportunities within the onshore market, particularly among the consumer and healthcare companies, as it continues to mature.
* Whilst the fund manager considers ESG aspects they are not bound by any specific ESG criteria and have the flexibility to invest across the ESG spectrum from best to worst in class.
Higher earnings visibility and growth offered by domestic sectors
In China, we expect the domestic economy to fully recover and, at the same time, US-China tensions to continue for the foreseeable future.
Digitalisation is opening up new value-added opportunities
In China, the digital trend is very evident and is supported by increasing infrastructure spend.
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. As a large portion of the fund is invested in less developed countries, you should be prepared to accept significantly large fluctuations in the value of the fund. As this fund is invested in a particular country, you should be prepared to accept greater fluctuations in the value of the fund than for a fund with a broader investment mandate. The fund may invest in certain securities listed in China which can involve significant regulatory constraints that may affect the liquidity and/or the investment performance of the fund. The fund invests in a limited number of holdings and is less diversified. This may result in large fluctuations in the value of the fund.
This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Data as at 31 May 2020, unless otherwise stated.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
For more information on our funds and the relevant risks, please refer to the share class-specific Key Investor Information Documents (available in local language), the Annual or Interim Reports , the Prospectus, and constituent documents, available from www.invesco.eu. A summary of investor rights is available in English from www.invescomanagementcompany.lu. The management company may terminate marketing arrangements.
This is not an invitation to subscribe for shares in the fund and is by way of information only, it should not be considered financial advice. This does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Persons interested in acquiring the fund should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences. As with all investments, there are associated risks. This document is by way of information only. Asset management services are provided by Invesco in accordance with appropriate local legislation and regulations. The fund is available only in jurisdictions where its promotion and sale is permitted. Not all share classes of this fund may be available for public sale in all jurisdictions and not all share classes are the same nor do they necessarily suit every investor. Fee structure and minimum investment levels may vary dependent on share class chosen. Please check the most recent version of the fund prospectus in relation to the criteria for the individual share classes and contact your local Invesco office for full details of the fund registration status in your jurisdiction. Please be advised that the information provided in this document is referring to Invesco China Focus Equity Fund Class A (accumulation - USD) exclusively. This fund is domiciled in Luxembourg.
