Summary

• The Chindia Equity Fund (I class USD) returned 3.4% during the month bringing year to date performance to 20.8%.
• The Indian market continued the strong rally while returns from China were more modest.
• In contrast to much of the developed world, COVID-19 case data in China and India continued on a downward trend.

Market update

Vaccine optimism and continued easy money supply extended the equity market rally into December. Particularly good performance was achieved from some of the fund’s Indian holdings most notably Asian Paints 26.2%, Crompton Greaves 26.0% and Gail 21.7%. India’s weight was increased in the MSCI World Index which helped generate a US$6.5bn inflow from foreign investors with quality stocks the main beneficiaries. The performance of Chinese holdings was more muted with Alibaba Group the fund’s worst performer declining 11.6%. China widened their anti-trust rules during November. There was fear that increased scrutiny of the firm’s monopolistic practices would result in reduced future growth. Our expectations remain that the firm will adapt practices to stay on the right side of changing regulation.

Other than the wonderful vaccine news from November, COVID-19 virus news has been increasingly negative. Two new variants, one in the UK and one in South Africa have been shown to have increased transmission rates. This means that economically things might well get worse in the near term however an end to economic lockdowns are in sight, due to the rollout of vaccination programs. Thankfully data in mainland China and India suggest that case numbers continue to decline, and vaccination programs ought to be rolled out to provide immunisation to avoid the sort of second waves as seen in the Western world.

There remains scope for Indian and Chinese equities to form a greater part of global indices which would generate more buying by global investors.