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Chindia Equity Fund - October 2019



  • Chinese equity markets were flat on the month, trade war rhetoric de-escalated with trade talks being put back on the table.
  • Announcements of corporate tax rate cuts improved investor sentiment and boosted India’s equity market.

Monthly performance

The Chindia Equity Fund returned 3.6% during September, with the benchmark (MSCI EM GR USD) returning 1.9%. Outperformance was largely due to stock selection in the Indian portion of the strategy.

MSCI China was flat in September. Sectors contributing the most value were financial (2.3%) and information technology (6.9%). Those most detracting were consumer discretionary (-3.5%) and healthcare (-6.2%).

MSCI India returned 3.1% in September. Sectors that contributed the most value were energy (+9.6%), consumer discretionary (8.9%) and consumer staples (7.3%).

Market update

China   China

The month started off with proposed tariffs coming into force as scheduled on 1 September, the US began tariffs on more than US$125 billion worth of Chinese imports, whilst Beijing imposed tariffs on US$75 billion of US imports.

The beginning of the month was positive both as Hong Kong withdrew the controversial extradition bill and there were constructive messages concerning the US-China trade war.  On 5 September China’s Ministry of Commerce announced high level trade talks for early October; albeit the thirteenth round.  The month saw other signs of good faith from both sides as they announced various tariff exemptions.  

However, on 27 September a report was released revealing that Trump administration officials are weighing curbs on US investments in China, including the delisting of Chinese companies from American stock exchanges. The US Treasury Department swiftly responded two days later stating that “the administration is not contemplating blocking Chinese companies from listing shares on US stock exchanges at this time”. Tensions in Hong Kong increased in the run up to demonstrations against the founding of the People’s Republic.

Markets responded positively at first to the de-escalation, with the MSCI China GR rising 5.8% as at the 13 September, given rising tensions however the equity market finishing flat on the month.

India   India

After months of disappointing performance, Indian equities had a moment of reprieve in September as markets digested the positive announcement of a meaningful reduction in corporate tax rates.

India’s economy has been under a great deal of scrutiny so far this year as negative data continues to come out of the region; falling GDP and slowing auto and manufacturing sectors have created a great deal of negative sentiment among investors.  However, this month’s announcement by the Finance Minister has injected a degree of positivity into equity markets with the MSCI India GR increasing more than 5% on the day.

Fund positioning  

China   China


The strategy has retained the same sectoral weightings as last month.

India   India


The strategy has retained the same sectoral weightings as last month.


China   China


Whilst trade talks have been put back on the table, reports of stemming US investments into Chinese equities suggests the end of the trade war may not be as close as many investors hope.  With little sign of the end, further volatility in the Chinese equity market is highly likely.  It is likely the market will continue to look to Beijing for more supportive policies to buoy equity markets.

India   India


The continued efforts of the Modi government to provide fiscal easing has shown signs of changing investor sentiment this month. However, we will have to wait and see if it provides the stimulus they hope it will i.e. improving foreign direct investment and private investments, and ultimately improved economic growth.  It is likely that investors continue to look to fiscal and monetary policy to reinvigorate consumer demand and corporate investments.