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As the primary emerging market economy in the world, China has drawn steadily increasing interest from investors since the turn of the century. One of the principal advantages of the Chinese market is the lack of saturation in the market for telecommunications services, financial services and consumer goods. Growth in China’s economy has consistently outpaced that of developed countries for the past several years, and is projected to continue to do so for at least the next decade or two. The country is poised to benefit not only from its own continued growth, but also from the economic growth and expansion of a number of other major emerging market countries in the Asia region.
Matthews China Dividend Fund
The Matthews China Dividend Investor Fund (NASDAQ: MCDFX), launched in 2009, is one of three popular China-focused mutual funds that Matthews International offers. Yu Zhang currently manages the fund; his previous experience includes analyzing Japanese companies. The fund’s two primary investment goals are capital appreciation and current income. Typically, the fund invests a minimum of its $117 million of total assets in dividend-paying stocks of companies that are headquartered in China, including China’s Special Administrative Regions of Hong Kong and Macau, or that conduct extensive business in China. The fund manager uses fundamental analysis and a value investing approach to select stocks for the fund’s portfolio. The fund may also invest in convertible debt and other securities.
Among the fund’s major holdings are apparel manufacturer Shenzhou International Group Holdings, China Construction Bank H Shares, Boer Power Holdings, Yum Brands and the Shanghai Baosight Software Company.
The fund has an expense ratio of 1.19%, below average for actively managed emerging market funds, and offers a dividend yield of 2.95%. The five-year annualized return is 10%. The Matthews China Dividend Fund is rated slightly below-average in terms of risk, although it is above-average in volatility.
Fidelity China Region Fund
The Fidelity China Region Fund (NASDAQ: FHKCX) was launched in 1995. Bobby Bao manages the fund and uses fundamental analysis of companies, industries and economic conditions to select stocks for the fund’s portfolio. The primary investment goal of the fund is long-term capital appreciation. The fund ordinarily invests a minimum of 80% of its $1.8 billion in assets in equity securities of Chinese companies, including companies in Taiwan and Hong Kong. Any dividends or capital gains are distributed annually.
The fund’s major holdings include the China Construction Bank and the Bank of China Beijing, the Taiwan Semiconductor Manufacturing Company, Hong Kong Exchanges and Clearing, Ping An Insurance Group and media company Tencent Holdings.
The Fidelity China Region Fund carries a below average for the category expense ratio of 0.98%. The fund offers a dividend yield of 0.86%. Its five-year annualized return is 8.66%. The fund is rated as moderate risk.
Oberweis China Opportunities Fund
The Oberweis China Opportunities Fund (NASDAQ OBCHX), from Oberweis Funds and managed by firm president James Oberweis, was launched in 2005. The fund’s primary investment goal is capital growth. Under normal conditions, the fund invests 80% or more of its assets in the common stocks of Chinese companies that the fund manager thinks exhibit the highest potential for long-term growth. In addition to common stock, the fund may also invest in other securities that may provide the fund with exposure to other share classes that are traded in foreign markets.
Major portfolio holdings include the online discount retailer Vipshop Holdings, a company that has more than doubled its share price since 2012. Vipshop accounts for 8% of the fund’s total portfolio assets. Other major holdings for the fund are Tencent Holdings, Ping An Insurance Group, energy firm China Everbright International, biopharmaceutical firm China Biologic Products and NetEase, a major Chinese Internet portal firm.
The expense ratio for the Oberweis China Opportunities Fund is above average at 1.93%. The fund’s dividend yield is 0.6%. The five-year annualized return for the fund is 8%, but its more recent three-year annualized return is 24%. The fund is rated as above-average risk.
RS China Fund Class A Fund
The RS China Fund Class A fund (NASDAQ: RSCHX) from the RS Funds group began in 2011. Its manager is Michael Reynal, who previously led the emerging market analysis group at Provincial Global Investors. The main investment goal of the fund is long-term capital appreciation. The fund is typically at least 80% invested in Chinese companies, in the form of common stock, preferred stock or other securities that are convertible into stock. The fund invests in stocks from various market cap categories based on the fund manager’s assessment of the fundamental soundness and growth potential of the companies. The fund has approximately $12 million in total assets.
The RS China Fund Class A fund is heavily invested in financial sector companies that account for nearly 40% of the fund’s portfolio. Among the fund’s major portfolio holdings are China Construction Bank H Shares, the China Life Insurance Company, China Mobile and construction firm China Overseas Land and Investment.
The fund’s expense ratio is 1.75%. The fund offers a dividend yield of 0.96%. Its three-year annualized return is 13%. The fund is rated as slightly above-average risk.
AllianzGI China Equity A Fund
Alliance Global Investors launched the AllianzGI China Equity A Fund (NASDAQ: ALQAX) in 2010. Its manager is Christina Chung, who was previously a senior portfolio manager at the Royal Bank of Canada. The primary goal of the fund is long-term capital appreciation. The fund’s $5 million in assets is typically 90% invested in common stocks of Chinese companies. This includes companies headquartered in China, companies that derive at least half their revenues from operations in China or firms that have at least half of their total assets located in China. The fund manager focuses on undervalued or high growth potential stocks.
Major holdings of the fund include China Life Insurance Company, Digital China Holdings, Qingling Motors Company, food and beverage company Want Want China Holdings and China Construction Bank.
The fund’s expense ratio is 1.7%. The fund offers a dividend yield of 3.07%. The three-year annualized return for the fund is 11%. The AllianzGI China Equity A Fund is rated as moderate risk.
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