China-focused funds made up the top 44 performers for the month of September, as the Hang Seng shot up 18% on the back of rate cuts and stimulus package announcements from the People’s Bank of China.
While China enjoyed its heyday, the S&P 500 gained just over 2% for the month and the FTSE 100 dropped 1%. Across funds, China was the best-performing sector with an average 16.3% return, with Asia Pacific ex Japan following at 5.3% and global emerging markets at 4.3%.
Ben Yearsley, investment director at Fairview Investing, said: “China wants to be the dominant world power and succeeded in the fund world in September. It will be interesting to see if this is the start of a bull market or a dead cat bounce – the answer may depend on whether more spending taps are turned on by Beijing.”
By fund, the Redwheel China Equity fund went to the top of the table, with a 30.2% return. It was closely followed by Matthews China, at 30.1%, and FSSA All China, at 27.1%. All of the top ten performers of the month, which were exclusively China funds, returned above 20%.
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“Having looked at markets for 25 years now I don’t remember a month where one region or country has been so dominant,” Yearsley said.
“The fascinating thing about China is that even a few short weeks ago many commentators were still writing it off as an investment opportunity. Interestingly one fund group, M&G, launched a new China fund only a few weeks ago. It’s dangerous writing whole markets off.”
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Though the top of the table was uniform, Yearsley called those at the bottom of the table “a mixed affair”. Liontrust Russia fell the furthest, at 8.6%. TM Crux UK Smaller Companies was not far behind, dropping 8.2%, while WS Guinness Global Energy, decreased by 8%.
“The only real theme was UK micro-cap funds, especially those exposed to the Aim market. Rumours abound that the chancellor, Rachel Reeves, will remove the IHT break from Aim share – this would be a devastating blow to the junior market and at complete odds with the Labour party promise to be pro-growth,” Yearsley said.
“Energy funds also featured near the foot with the oil price falling near the $70 mark. From a sector view Healthcare was the worst performer dropping over 4% followed by the three UK sectors.”
China once again took the top spot with investment trusts, and the three China-focused investment trusts had the best returns, made up of the JP Morgan China Growth & Income trust at 24.5%, Fidelity China Special Situations at 22.4%, and Baillie Gifford China Growth at 21.9%. By sector after China, the top returns belonged to property securities, property UK healthcare, property Europe, and property UK commercial.
“Interestingly the rest of the top five sectors were all property – base rate cuts and a taming of inflation has led to investors rediscovering property as an asset class at the same time as one of the risk modelling companies that many financial advisers use as removed property as an asset class,” Yearsley said.
