Attached files
| file | filename |
|---|---|
| 8-K - CHINA FUND INC | fp0008017_8k.htm |
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Jul 31, 2013
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Monthly Insight
The China Fund, Inc. (CHN)
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Investment Objective
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The investment objective of the Fund is to achieve long term capital appreciation. The Fund seeks to achieve its objective through investment in the equity securities of companies and other entities with significant assets, investments, production activities, trading or other business interests in China or which derive a significant part of their revenue from China.
The Fund has an operating policy that the Fund will invest at least 80% of its assets in China companies. For this purpose, ‘China companies’ are (i) companies for which the principal securities trading market is in China; (ii) companies for which the principal securities trading market is outside of China or in companies organized outside of China, that in both cases derive at least 50% of their revenues from goods or services sold or produced, or have a least 50% of their assets in China; or (iii) companies organized in China. Under the policy, China means the People’s Republic of China, including Hong Kong, and Taiwan. The Fund will provide its stockholders with at least 60 days’ prior notice of any change to this policy.
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Performance Overview
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Performance History
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1 month
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3 months
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YTD
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1 Year
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3 Years
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5 Years
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10 Years
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Since
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(p.a.)
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(p.a.)
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(p.a.)
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Inception
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|||||
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NAV (%)
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3.31
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0.47
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5.18
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14.58
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3.01
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6.41
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14.39
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10.70
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Market price (%)
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2.70
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-2.61
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-4.16
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9.17
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1.12
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5.97
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11.07
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9.51
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Benchmark (%)
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3.24
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-2.90
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-2.09
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12.46
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4.32
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3.46
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11.01
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N/A
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Performance History
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2012
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2011
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2010
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2009
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2008
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2007
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2006
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2005
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NAV (%)
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12.07
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-24.37
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27.25
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72.82
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-46.95
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86.20
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57.10
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6.09
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Market price (%)
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20.46
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-27.51
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23.60
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72.19
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-40.65
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50.24
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65.67
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-21.51
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Benchmark (%)
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22.65
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-18.36
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13.60
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67.12
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-49.37
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37.97
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39.50
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10.27
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Source: State Street Bank and Trust Company. Source for index data: MSCI as at Jul 31, 2013.
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Portfolio Analysis
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Sector allocation (%)
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Country allocation (%)
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 |
 |
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Source: State Street Bank and Trust Company as at Jul 31, 2013.
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* China includes A-shares (6.3%), A-share equity linked securities (6.9%),
B-shares (0.0%), H-shares (11.5%) and Red-chips (15.5%).
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The China Fund, Inc. (CHN)
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Portfolio Analysis (continued)
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Top 10 Holdings
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Sector
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%
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HAND ENTERPRISE SOLUTIONS CO., LTD.
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I.T.
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6.3
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CHINA EVERBRIGHT INTERNATIONAL, LTD.
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INDUSTRIALS
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6.1
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TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
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I.T.
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5.6
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SUN HUNG KAI PROPERTIES, LTD.
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FINANCIALS
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4.6
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INDUSTRIAL & COMMERCIAL BANK OF CHINA
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FINANCIALS
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4.3
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CHINA MOBILE, LTD.
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TELECOM
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4.1
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ENN ENERGY HOLDINGS, LTD.
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UTILITIES
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3.3
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TENCENT HOLDINGS, LTD.
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I.T.
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3.2
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RUENTEX DEVELOPMENT CO., LTD.
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FINANCIALS
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2.6
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HERMES MICROVISION
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I.T.
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2.2
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Total
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42.3
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Direct Investments
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Sector
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%
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GOLDEN MEDITECH HOLDINGS, LTD. 15.0%, 11/16/13
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OTHERS
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1.6
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Total
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1.7
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Source: State Street Bank and Trust Company as at Jul 31, 2013.
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Fund Details
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NAV
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$23.75
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Market price
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$20.52
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Premium/Discount
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-13.60%
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Market cap
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US$321.8m
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Shares outstanding
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15,682,029
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Exchange listed
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NYSE
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Listing date
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July 10, 1992
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Benchmark
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MSCI Golden Dragon Index (Total Return)
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Fund Manager
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Christina Chung
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Listed and direct investment manager
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RCM Asia Pacific Limited
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Source: State Street Bank and Trust Company as at Jul 31, 2013.
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Distribution History (10 years)
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Declaration
date |
Ex-dividend
date
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Record
date |
Payable
date |
Dividend/
Share |
Income
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Long-term Capital
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Short-term Capital
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10 Dec 2012
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20 Dec 2012
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24 Dec 2012
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28 Dec 2012
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3.2517
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0.3473
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2.9044
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0.0000
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8 Dec 2011
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21 Dec 2011
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23 Dec 2011
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29 Dec 2011
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2.9964
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0.1742
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2.8222
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0.0000
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8 Dec 2010
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21 Dec 2010
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24 Dec 2010
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29 Dec 2010
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2.2742
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0.3746
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1.8996
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0.0000
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9 Dec 2009
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22 Dec 2009
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24 Dec 2009
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29 Dec 2009
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0.2557
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0.2557
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0.0000
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0.0000
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8 Dec 2008
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22 Dec 2008
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24 Dec 2008
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23 Jan 2009
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5.8174
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0.4813
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5.3361
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0.0000
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7 Dec 2007
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19 Dec 2007
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21 Dec 2007
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25 Jan 2008
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12.1200
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0.2800
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9.0000
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2.8400
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8 Dec 2006
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19 Dec 2006
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21 Dec 2006
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29 Dec 2006
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4.0117
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0.2996
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2.7309
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0.9812
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9 Dec 2005
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19 Dec 2005
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21 Dec 2005
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29 Dec 2005
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2.5119
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0.2172
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2.2947
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0.0000
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13 Dec 2004
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20 Dec 2004
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22 Dec 2004
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7 Jan 2005
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3.5701
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0.1963
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3.2664
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0.1074
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19 Dec 2003
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29 Dec 2003
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31 Dec 2003
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15 Jan 2004
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1.7800
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0.0700
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0.6700
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1.0400
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Source : State Street Bank and Trust Company as at December 31, 2012
2
The China Fund, Inc. (CHN)
The China Fund Inc. NAV Performance of USD $10,000 since inception (with dividends reinvested at NAV price)
Past performance is not a guide to future returns.
Source: State Street Bank and Trust Company as at Jul 31, 2013.
The China Fund Inc. Premium / Discount
Past performance is not a guide to future returns.
Source: State Street Bank and Trust Company as at Jul 31, 2013.
3
The China Fund, Inc. (CHN)
Manager’s Commentary
Market Review
Chinese equity markets rebounded during the month after a sharp sell-off in June. Investors were encouraged by Premier Li’s comments that the government would take the necessary actions to keep real Gross Domestic Product (GDP) growth rate above 7%. Macroeconomic data was still on the weak side, but the market seems to expect China’s policy to become more supportive in the second half of the year. The expectation is that more targeted microeconomic support measures may be rolled out in the third quarter, while the macroeconomic policy stance (proactive fiscal policy and prudent monetary policy) may remain unchanged. Environmental projects, small and medium sized enterprises, rural development, rail and information technology (IT) services are expected to receive targeted support from the government. In addition, the market showed little reaction to next step taken towards interest rate liberalization, which was the People’s Bank of China’s announcement of removing the restriction on lending rates from July 20. The change is not expected to impact the net interest margin of China’s banks.
In Taiwan, the economy expanded at a faster-than-expected pace in the second quarter as domestic consumption improved. Real Gross Domestic Product rose 2.27 percent from a year earlier after increasing 1.67 percent in the first quarter. The slowdown of China is still a major risk facing Taiwan because the economy is largely supported by China while external demand remains lackluster.
Fund review
The Fund outperformed relative to the benchmark in July, which was mainly attributable to stock selection. Stock selection in the industrials and information technology sectors helped performance the most.
The top contributor for the month was China Everbright International. The company continued to benefit from positive policy support for environmental protection. Another contributor was Ruentex Development, the share price rose during the month in anticipation of the spin-off of its insurance business next year and a larger part of its property development revenue being recognized in the second half of the year. On the negative side, one of the top detractors was Digital China. Digital China’s share price was undermined on concerns over weak personal computer demand as well as a slowdown in corporate IT spending partly due to the change in political leadership and worries over an economic downturn in China. However, Digital China’s valuation is very cheap and it is a key beneficiary of the rollout of smart city projects in China.
Outlook
In the short term, we believe the market will focus on earnings results for the first half of 2013, to be released over the next few weeks. We believe that the earnings results will be mixed while the outlook is likely to remain cautious. However, following the unexpected sharp spike of interbank interest rates in China at the end June, we believe that the PBOC will provide sufficient liquidity into the system to preempt a similar incident occurring. Combined with official comments on maintaining growth stability as well as market expectations of reform initiatives to be announced over the next few months, we believe that the market will recover in the second half of 2013. We will continue to focus on stock selection particularly in the industrial, information technology and consumer sectors.
For the Taiwan market, we believe the steady pick up in the global demand for technology products will continue to benefit local producers of electronics components and support overall confidence. The bright job market outlook will boost both consumer confidence and retail spending and in turn overall GDP growth in the second half of the year. We continue to focus on the stocks that can benefit from the improved demand for technology products. Strong corporate earnings would be the major factor that supports the Taiwan market.
Source : RCM Asia Pacific Limited as at Jul 31, 2013.
4
The China Fund, Inc. (CHN)
Portfolio Holdings
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CUSIP
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Security Description
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Cost Base
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Base MV
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Shares
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Percentage of
Net Assets
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B3VN92906
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HAND Enterprise Solutions Co., Ltd.
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1,793,494.00
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23,384,065.00
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9,554,573
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6.3
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663094902
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China Everbright International, Ltd.
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11,377,285.00
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22,834,211.00
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25,049,000
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6.1
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688910900
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Taiwan Semiconductor Manufacturing Co., Ltd.
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16,072,089.00
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20,796,358.00
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6,084,000
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5.6
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685992000
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Sun Hung Kai Properties, Ltd.
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17,289,798.00
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16,967,450.00
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1,269,000
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4.6
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B1G1QD902
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Industrial & Commercial Bank of China
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16,829,555.00
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16,038,294.00
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24,390,000
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4.3
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607355906
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China Mobile, Ltd.
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15,085,051.00
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15,357,535.00
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1,445,500
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4.1
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633393905
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Enn Energy Holdings, Ltd.
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606,420.00
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12,205,370.00
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2,204,000
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3.3
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B01CT3905
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Tencent Holdings, Ltd.
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7,312,795.00
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11,888,828.00
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262,100
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3.2
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674842901
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Ruentex Development Co., Ltd.
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4,180,803.00
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9,658,352.00
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4,933,904
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2.6
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B3WH02907
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Hermes Microvision Inc.
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7,867,215.00
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8,342,754.00
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269,000
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2.2
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644094906
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Taiwan FamilyMart Co., Ltd.
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1,186,926.00
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8,232,407.00
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1,592,652
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2.2
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635186901
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Digital China Holdings, Ltd.
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13,205,899.00
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7,971,005.00
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7,256,000
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2.1
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626073902
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Delta Electronics, Inc.
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4,550,608.00
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7,836,276.00
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1,615,000
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2.1
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17313A533
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Gree Electric Appliances, Inc. Access Product
(expiration 01/17/14)
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6,453,442.00
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7,745,794.00
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1,838,546
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2.1
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B00G0S903
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CNOOC, Ltd.
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8,859,687.00
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7,621,112.00
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4,228,000
|
2.0
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|
658444906
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Merida Industry Co., Ltd.
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6,624,016.00
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7,510,046.00
|
1,126,000
|
2.0
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959GRNII9
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Taiwan Life Insurance Co., Ltd., 4.0%, 12/28/14
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6,178,274.00
|
7,456,062.00
|
200,000,000
|
2.0
|
|
B15456906
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Bank of China, Ltd.
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8,369,492.00
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7,423,917.00
|
17,771,000
|
2.0
|
|
913BMZ902
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Ping An Insurance (Group) Company of China, Ltd.
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9,494,980.00
|
7,362,358.00
|
1,418,047
|
2.0
|
|
619376908
|
Access Product (expiration 06/30/15)
China Resources Land, Ltd.
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5,128,719.00
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7,014,176.00
|
2,554,000
|
1.9
|
|
671815900
|
Qingling Motors Co., Ltd.
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8,718,221.00
|
6,870,567.00
|
28,960,000
|
1.8
|
|
B1L8PB906
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Tong Hsing Electronic Industries, Ltd.
|
5,919,469.00
|
6,719,024.00
|
1,380,000
|
1.8
|
|
637248907
|
MediaTek Inc.
|
6,194,126.00
|
6,711,020.00
|
559,000
|
1.8
|
|
B2R2ZC908
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CSR Corp., Ltd.
|
7,466,210.00
|
6,606,556.00
|
9,930,000
|
1.8
|
|
620267906
|
Advantech Co., Ltd.
|
4,104,778.00
|
6,208,794.00
|
1,284,000
|
1.7
|
|
644806002
|
Hutchison Whampoa, Ltd.
|
5,075,405.00
|
6,008,858.00
|
532,000
|
1.6
|
|
986PLG005
|
Golden Meditech Holdings, Ltd. 15.0%, 11/16/13
|
6,001,198.00
|
6,005,609.00
|
58,222,500
|
1.6
|
|
B3ZVDV905
|
Sinopharm Group Co., Ltd.
|
4,940,075.00
|
5,871,695.00
|
2,138,000
|
1.6
|
|
608169900
|
Beijing Enterprises Holdings Ltd
|
5,587,882.00
|
5,262,824.00
|
789,500
|
1.4
|
|
B236JB905
|
Tiangong International Co., Ltd.
|
5,449,044.00
|
4,956,117.00
|
18,480,000
|
1.3
|
|
626735906
|
Hong Kong Exchanges and Clearing, Ltd.
|
4,947,274.00
|
4,758,095.00
|
306,500
|
1.3
|
|
B6WY99909
|
China Medical System Holdings, Ltd.
|
376,020.00
|
4,638,507.00
|
5,139,300
|
1.2
|
|
643055908
|
Golden Meditech Holdings, Ltd.
|
4,555,715.00
|
4,292,041.00
|
35,040,000
|
1.2
|
|
633521901
|
Taiwan Hon Chuan Enterprise Co Ltd
|
4,732,447.00
|
4,228,783.00
|
1,904,000
|
1.1
|
|
613623909
|
Hengan International Group Co., Ltd.
|
3,889,897.00
|
4,134,700.00
|
375,500
|
1.1
|
|
665157905
|
Comba Telecom Systems Holdings, Ltd.
|
7,565,579.00
|
3,928,006.00
|
10,958,500
|
1.1
|
|
17313X574
|
China State Construction Engineering Corp., Ltd.
|
4,674,320.00
|
3,828,026.00
|
7,375,772
|
1.0
|
|
B6VG8G904
|
(expiration 01/17/14)
Asian Pay Television Trust
|
4,074,574.00
|
3,671,452.00
|
5,200,000
|
1.0
|
|
B57JY2909
|
China Minsheng Banking Corp Ltd
|
3,689,595.00
|
3,667,411.00
|
3,628,000
|
1.0
|
|
651795908
|
Natural Beauty Bio-Technology, Ltd.
|
4,906,910.00
|
3,506,392.00
|
47,710,000
|
1.0
|
|
B16NHT900
|
Shui On Land, Ltd.
|
4,155,622.00
|
3,307,064.00
|
11,055,500
|
0.9
|
|
99ZMCS903
|
Kweichow Moutai Co., Ltd. Access Product
(expiration 10/26/15)
|
4,046,181.00
|
3,072,972.00
|
112,684
|
0.8
|
|
B633D9904
|
Zhongsheng Group Holdings, Ltd.
|
3,466,065.00
|
2,759,563.00
|
2,662,000
|
0.7
|
|
972ZGS900
|
Gree Electric Appliances, Inc. Access Product
|
1,898,593.00
|
1,812,639.00
|
430,249
|
0.5
|
|
(expiration 10/14/13)
|
|||||
|
B4PTR3906
|
Fook Woo Group Holdings, Ltd.
|
7,974,083.00
|
1,119,518.00
|
25,314,000
|
0.3
|
|
B1TDQL904
|
Ping An Insurance (Group) Company of China, Ltd.
|
1,566,145.00
|
1,089,801.00
|
209,900
|
0.3
|
|
972ZHB906
|
Access Product (expiration 01/17/14)
China State Construction Engineering Corp., Ltd.
|
886,370.00
|
808,261.00
|
1,555,844
|
0.2
|
|
(expiration 07/28/14)
|
|||||
|
ACI0090H8
|
Zong Su Foods (acquired 09/21/10)
|
15,000,034.00
|
0.00
|
2,677
|
0.0
|
Source: State Street Bank and Trust Company as at Jul 31, 2013.
5
The China Fund, Inc. (CHN)
The information contained herein has been obtained from sources believed to be reliable but RCM and its affiliates do not warrant the information to be accurate, complete or reliable. The opinions expressed herein are subject to change at any time and without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information is contained in the fund’s annual and semiannual reports, proxy statement and other fund information, which may be obtained by contacting your financial advisor or visiting the fund’s website at www.chinafundinc.com. This information is unaudited and is intended for informational purposes only. It is presented only to provide information on investment strategies and opportunities. The Fund seeks to achieve its objective through investment in the equity securities of companies and other entities with significant assets, investments, production activities, trading or other business interests in China or which derive a significant part of their revenue from China. Investing in non-U.S. securities entails additional risks, including political and economic risk and the risk of currency fluctuations, as well as lower liquidity. These risks, which can result in greater price volatility, will generally be enhanced in less diversified funds that concentrate investments in a particular geographic region. The Fund is a closed-end exchange traded management investment company. This material is presented only to provide information and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares are sold on the open market through a stock exchange, where shares may trade at a premium or a discount. Holdings are subject to change daily.