Chindia Equity Fund: October 2020

 

 

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Summary

  • The FTSE Emerging Market index declined 3.5% during September and the Chindia Equity Fund (I class USD) was broadly in line with this falling 3.2%.
  • After reaching a two decade high towards the beginning of the month, Chinese equity markets turned in September finishing over 4% lower. The Indian market performed slightly better after declining a little over 2%
  • A new position was added in Sea Ltd, while holdings in Bandhan Bank and Titan were sold.

Market update

India and China relations eased slightly over the month with both sides committing to “quickly disengage” the tens of thousands of troops on the Himalayan border. Hopefully, rumoured alignment of Tibetan freedom fighters with Indian military forces will not re-inflate tensions. Tibet remains highly contentious with China reportedly keen to appoint the next Dalai Lama. Indian Prime Minister Modi has, since 2018, attempted to distance himself from the spiritual leader in order to appease Beijing.

Sea Limited was purchased during the month and shares rose 10%. Sea is a games and ecommerce company serving India and the high-growth Southeast Asian (ASEAN) region. The e-commerce sector is currently unprofitable; however, the growth trajectory of revenues looks startlingly like historically enjoyed by Amazon. With a market capitalisation of less than US$80bn, serving the region with the best demographics in the world, the opportunity to dip a toe into this exposure within the Fund seemed compelling. While we could be wrong, the benefits of being right would be very fruitful. 

Bandhan Bank was sold due to concerns over the potential for an increase in bad debts due to COVID-19’s economic impact. Luxury retailer Titan, which performed well during the month, was also sold. The Titan share price had recovered close to pre-pandemic levels and we were concerned that the valuation had become excessive.

The Chindia Equity Fund aims to invest in quality companies offering growth at a reasonable price.