Summary

• The performance of the China portion of the portfolio was strong especially that from Alibaba, an 8% position, which returned 18% during the month
• Performance was broadly flat during the month, in-line with the emerging market index. We are encouraged by the performance seen over the last three months which was up 9.3% following the refinement in the investment process. It is envisaged that turnover of holdings will be considerably lower going forward
• A new position was established in Reliance Industries Limited providing exposure to the Indian energy and telecommunications sectors.
  
   

Market update

The Chindia fund fell 0.1% during the month of November which was in line with the emerging market index.

In line with recent months, the China portion of the strategy continued to benefit from strong stock selection. During November, the Chinese portion returned 3.6% versus the Chinese market return of 1.8%. Alibaba, an 8% holding, was the star performer with shares rising 18.0% during the month. The second quarter results, released at the start of the month, were 23% ahead of consensus estimates. The firm has raised over $11bn in a secondary share listing on the Hong Kong exchange. The core business remains healthy and is seeing mid-20% year-on-year growth in commission & customer management revenues.

The unrest in Hong Kong has seen visitor numbers fall to a 15-year low and the local economy fall into recession. Towards the end of the month, Donald Trump signed a bill supporting the democratic rights of the people of Hong Kong. This may complicate the USA-China trade negotiations. Hong Kong represents a high proportion of sales of Prudential. Historically visitors from mainland China have used life assurance purchased in Hong Kong as a method of moving wealth offshore. Following the share price appreciation seen in October, the spin-off of M&G, and concerned about the near term outlook for the business, the Prudential position was sold.

The Indian portion meanwhile performed relatively poorly erasing all the gains from the China side. A number of the domestic Indian industrial stocks held fell by high single digit to low double digit percentage points reflecting the deteriorating economic prospects in the country. Over the course of 2019, consensus economic growth forecasts for 2020 fell from 7.5% to 5.6%.

Positions in Coal India Limited, Future Consumer Limited and the State Bank of India were sold. A new position was established in Reliance Industries which provides exposure to energy and the telecoms sector. Through subsidiary Jio the firm aggressively entered the mobile telephone sector in 2016 and is now the largest mobile network operator in India. The company may look to list some of their underlying businesses which may demonstrate the value of the total firm.

Companies in India generally trade on high multiples reflective of positive growth prospects. Our Global Equity Team is somewhat circumspect over the short term growth prospects, however longer term demographics are clearly positive. Going forward we do not envisage such high turnover as the fund has experienced recently.