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Chindia Equity Fund: December 2020


Summary and market update

The equities of emerging markets generally responded positively to the news of no less than three successful late stage Coronavirus vaccine trials. Of the trials, the most important for most emerging market citizens is the Oxford-AstraZeneca product. While likely not as effective as the two mRNA vaccines developed by Pfizer and Moderna, the AstraZeneca vaccine has a number of advantages including ease of transport, plans for huge production and a very low price.

The FTSE Emerging Market Index returned 8.6% with the Chinese market some way behind this having already mirrored the country’s post COVID economic recovery to a large extent. The Chindia Find (I class USD) returned 6.8%. 

A large number of holdings provided very strong returns with the Indian portion of the fund performing strongly. Chinese internet giant Alibaba were the main disappointment, declining 13.6% following disappointing news on the delay of the Ant financial IPO and increases in antitrust supervision in China. Meanwhile the firm reported stellar growth in retail sales following a better than expected singles day event.  We envisage the long run growth potential of on-line retail in China to be substantial and remain excited about the prospects of growth in cloud services.

A small 1% position was established in Chinese internet dating company Momo. The company trades at a huge discount to Western peers, and our belief is that investors will begin factoring in dating resuming within China next year.
During the month a large trade agreement was reached between 15 countries, including China but not India, in the Asia Pacific region. This Regional Comprehensive Economic Partnership spans 2.2 billion people and covers 28% of global trade. This ought to increase Chinese trade and influence in the region.

As anticipated in last month’s commentary we have seen a depreciation in the US Dollar which ought to be beneficial for equities in China and India.