The malaise facing the IA China fund sector continued into the first month of 2024 as the sector suffered the biggest losses of all IA sectors in January, with the average fund falling 9.2%, according to FE Fundinfo data.
The Chinese property sector, which makes up around a quarter of the country’s economy, has been a particular drag on returns over the last year. In January, one of the sector’s leading players, China Evergrande, entered into a forced liquidation.
This was seen in the month’s worst performing individual funds, with the £14.1m Redwheel China Equity, £203.3m Baillie Gifford China, and £5.8m JPM China all among the bottom 10 for returns. Climate strategies, such as Baillie Gifford Climate Optimism and Active Solar also struggled in January.
|Funds – 1 month (bottom ten)
|Redwheel China Equity
|Baillie Gifford Climate Optimism
|Amati Strategic Metals
|Baillie Gifford China
|Guinness China A Share
|GMO Climate Change Select
|Matthews China Small Companies
|GMO Climate Change Investment
In contrast, IA North America and Technology were the two best-performing sectors, up 3% and 4.8% respectively.
Ben Yearsley, director at Fairview Investing, said. “These two are so intertwined that it does distort the picture of US equities. Microsoft is again the world’s largest company with a value just under $3trn. But with Apple, Alphabet and Amazon also in the top ten, a tech fund, a Nasdaq tracker, an S&P tracker and a MSCI World tracker look very similar and perform in tandem.”
He added: “The positive equity stories of 2023 all continue with tech, India, and Japan all starting 2024 with a bang. Two of those areas look pretty expensive – then again they almost always do. Japan remains one of the most interesting stories with corporate change and more shareholder awareness helping drive markets. On the other side, China can’t seem to escape the doom loop – Beijing need a big bang to pull markets from historic lows.”
Yearsley pointed out that, for a brief period of time in January, markets regained some confidence after Beijing announced stimulus measures. However this confidence evaporated, with the Hang Seng index finishing the month down by more than 9%.
“Contrast that with Japan where the Topix put on almost 7% – the BoJ has kept the world’s last remaining negative interest rate policy and wants inflation. Despite the excellent returns from Japanese equities many fund managers are confident on future returns and thinking this is just the start of a sustained bull run. The FTSE had a lacklustre start to 2024 falling 1.27%.”
Oxeye Hedged Income was the top performing fund, returning 9.5% in January. Yearsley noted the fund has regularly topped and tailed the monthly performance tables over the past few years.
Jupiter’s India-focused offerings, Jupiter India and Jupiter India Select, both performed strongly by returning 8.7% and 8.3% respectively. The average IA India fund returned 1.8% over the month.
|Funds – 1 month (top ten)
|Oxeye Hedged Income
|Axiom Concentrated Global Growth
|AQR Sustainable Delphi Long Short Equity
|Polar Capital Global Technology
|Lord Abbett Innovation Growth
|AQR Style Premia
|Jupiter India Select
|Nomura Japan Strategic Value
|Herald Worldwide Technology