Email of the day (6)
Comment of the Day

January 10 2012

Commentary by David Fuller

Email of the day (6)

More on China
"I see you have not increased any of your Chinese investments yet. With the strength in recent days, I wonder if you are considering to do so. And if you are, what would you invest in? Thanks in advance."

David Fuller's view My most recent purchase in my personal long-term equity investment portfolio was a stake in the UK-listed Aberdeen Asian Income Fund (AAIF LN) which has some Chinese regional holdings. I bought this on 8th November 2011. An investment trust, it currently trades at a premium to NAV of just over 5%. Here are its top holdings.

I maintain that China's stock market is historically cheap and that it should benefit this year from a change in monetary policy, particularly if inflationary pressures do not flare up once again. However, I already have an overweight position in China, with my main personal position being in the Irish-listed Atlantis China Healthcare Fund (ATCHLTH ID), run by the formidable Yang Liu. However, the costs are higher than I would like, including a redemption fee, and it is only available in Europe.

I also have a stake in the UK-listed JPMorgan Chinese Investment Trust (JMC LN), which currently sells at a discount to NAV of just over 10%. It had a bad year in 2011 but looks to be building support in which case a recovery should follow. Top holdings.

If you Search the Library under China you will find plenty of other candidates. Among US listings you will find the closed-end Morgan Stanley China A-Share Fund (CAF US) which sells at a discount to NAV of 9.7%. Top holdings.

For ETFs there is the iShares FTSE/Xinhua China 25 Index Fund (FXI US). Plus sub-sector ETFs such as Global X China Consumer ETF (CHIQ US), Global X China Energy ETF (CHIE US) and Global X China Financials ETF (CHIX US).

I think you are right to commence investing in China at this time but I recommend that you also conduct your own due diligence regarding the specific investment vehicles. That starts with reading the prospectuses.

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