BEA Union Investment China Gateway Fund ("CGF")

Dynamic Allocation in Chinese Equities and Bonds To Capture Opportunities in Economic Recovery

Flexible allocation aiming to foster long term return

Ranked high in its own category in the past 2 years1

3 major investment themes

Domestic consumption, new energy application, tactically positions in sector rotation

Aims to provide monthly dividends
Dividends are not guaranteed, and distributions may be paid out of income and/or capital+

Annualized dividend yield as of March2
USD 4.5%
HKD 4.5%
RMB hedge 6.8%

China: Taking the lead in global economic recovery

“First-in-first-out”: China was the first country to recover from the pandemic

  • China’s anti-epidemic results were remarkable. Last year, the country’s GDP grew by 2.3%3 and the fourth quarter GDP up 6.5% year-on-year3, while GDP topped 100 trillion yuan for the first time3. It will likely be the only major economy with positive economic growth last year.
    “First-in-first-out”: China was the first country to recover from the pandemic
    1. *Estimated figure
      Source: BEA Union Investment, International Monetary Fund, January 2021

    US-China tension likely eases with Biden taking the office

  • Joe Biden takes the office while Democrats take control of both the Senate and the House of Representatives. China policy of the new office is yet to be implemented in the first quarter. US-China tension likely eases in the near term where the economic recovery of China is believed not to be inhibited.

  • Strong RMB supports related asset price

  • RMB was up 6% last year. The inclusion of China into global bond and equity indexes and the continuation of its economic recovery is supportive to RMB and the price of related assets.

  • Focuses on 3 investment themes to capture opportunities in economic recovery

    1. Domestic consumption

  • China’s "internal circular” economy aims to boosts local supply chain by driving domestic demand. Consumption upgrading is expected to continue with rising per capita income and expansion of middle-class population. The leading domestic companies, like beer, dairy-products and sportswear, are the expected key beneficiaries.
  • The pandemic gave rise to “stay-at-home economy”. More consumers are now moving their shopping online. Last year, China's online sales of physical goods accounted for 24.9%3 of the total. The change in consumption pattern is gradually trending.Total retail sales of consumer goods and growth rate (quarterly gures)
    1. Source: National Bureau of Statistics, January 2021

    2. The application of new energy

  • China further promotes the use of new energy in response to climate change and low-carbon transformation. As of 2018, China was the top supplier of wind, solar and hydropower in the world.
  • Following the resumption of work in provinces coupled with the promotion of green transformation, the production and sales of electric vehicles in China soared last year. It is expected to be on another growth cycle when the economy fully revives.
  • New energy continues to replace the use of traditional energy

      Source: The State Council Information Office of PRC, December 2020

    3.Tactically positions in sector rotation

  • Small scale outbreaks of COVID are found in certain regions despite the deployment of vaccines. We expect the sector rotation between old and new economies will continue. Old economies like oil, aviation and property will probably chase up when valuation is becoming attractive with pandemic fading. While new economies, with strong fundamentals, are expected to outperform in the longer term. The Fund will tactically position in sector rotation to capture alpha opportunities.
  • The production and sales volume of electric vehicle in China

      Source: China's Passenger Car Association (CPCA), November 2020
      3. Source: National Bureau of Statistics, January 2021.

    Dynamic allocation in China equities and bonds to boost the return of the portfolio

    Apart from equity markets, the Fund also invests in onshore and offshore bond markets which are rapidly growing in China to diversify the portfolio risk. We prefer China property names in the bond sector. Last year, the cumulative sales of commercial properties in China surged to 14.1 trillion yuan, up 7% year-on-year3. The new funding rules implemented by China government are expected to deleverage property developers and pave the way for a more steady development of the industry in longer term.

    Real Estate Climate Index

      Source: National Bureau of Statistics, January 2021.
      3. Source: National Bureau of Statistics, January 2021.

    The Fund frequently adjusts the mix of China A-shares, Hong Kong equities, American Depository Receipts (ADR), onshore and offshore bonds and cash through dynamic allocation in response to market movement. It aims to capture the investment opportunities across markets and maximize the return of the overall portfolio.

    Dynamic allocation in China equities and bonds to boost the return of the portfolio

    The investment team of BEA Union Investment consists of 18 seasoned investment professionals with the expertise in managing assets in retail, institutional and MPF sectors. The team specializes in investment and research in Hong Kong, China A-shares as well as Asian equity markets, and provide clients with stable and sustainable portfolio performance.

    Fund Factsheet