Attached files
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| 8-K - CHINA FUND INC | fp0009173_8k.htm |
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Dec 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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3 Years
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5 Years
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10 Years
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Since
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| Performance History |
1 month
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3 months
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YTD
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1 Year
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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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NAV (%)
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-0.28 | 6.81 | 17.03 | 17.03 | -0.27 | 16.88 | 14.06 | 11.03 | ||||||||||||||||
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Market price (%)
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1.65 | 9.94 | 11.48 | 11.48 | -0.90 | 15.68 | 8.02 | 10.09 | ||||||||||||||||
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Benchmark (%)
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-1.25 | 3.83 | 7.25 | 7.25 | 2.41 | 15.31 | 9.61 | N/A | ||||||||||||||||
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Performance History
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2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
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NAV (%)
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17.03 | 12.07 | -24.37 | 27.25 | 72.82 | -46.95 | 86.20 | 57.10 | ||||||||||||||||
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Market price (%)
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11.48 | 20.46 | -27.51 | 23.60 | 72.19 | -40.65 | 50.24 | 65.67 | ||||||||||||||||
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Benchmark (%)
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7.25 | 22.65 | -18.36 | 13.60 | 67.12 | -49.37 | 37.97 | 39.50 |
Source: State Street Bank and Trust Company. Source for index data: MSCI as at Dec 31, 2013.
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Portfolio Analysis
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Sector allocation (%)
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Country allocation (%)
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Source: State Street Bank and Trust Company as at Dec 31, 2013.
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* China includes A-shares (3.7%), A-share equity linked securities (8.4%), B-shares (0.0%), H-shares (14.1%) and Red-chips (14.3%).
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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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CHINA EVERBRIGHT INTERNATIONAL, LTD.
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INDUSTRIALS
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6.2
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TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
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I.T.
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4.8
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HAND ENTERPRISE SOLUTIONS CO., LTD.
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I.T.
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3.7
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CHINA MINSHENG BANKING CORP., LTD.
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FINANCIALS
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3.7
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ENN ENERGY HOLDINGS, LTD.
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UTILITIES
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3.6
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TENCENT HOLDINGS, LTD.
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I.T.
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3.5
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BEIJING ENTERPRISES HOLDINGS, LTD.
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INDUSTRIALS
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3.2
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HUTCHISON WHAMPOA, LTD.
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INDUSTRIALS
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2.9
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GREE ELECTRIC APPLIANCES, INC.
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INDUSTRIALS
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2.7
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PING AN INSURANCE, LTD.
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FINANCIALS
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2.7
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Total
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37.0
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Direct Investments
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Sector
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%
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Nil
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||
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Total
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-
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Source: State Street Bank and Trust Company as at Dec 31, 2013.
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Fund Details
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NAV
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$23.18
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Market price
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$20.81
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Premium/Discount
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-10.22%
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Market cap
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US$326.34m
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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 Dec 31, 2013.
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Distribution History (10 years)
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Declaration
date
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Ex-dividend
date
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Record
date
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Payable
date
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Dividend/
Share
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Income
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Long-term
Capital
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Short-term
Capital
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13 Dec 2013
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19 Dec 2013
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23 Dec 2013
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27 Dec 2013
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3.3140
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0.4387
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2.8753
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0.0000
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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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Source : State Street Bank and Trust Company as at December 31, 2013. Dividend/Share includes Income, Long-term Capital gains and Short-term Capital gains.
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 Dec 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 Dec 31, 2013.
3
The China Fund, Inc. (CHN)
Manager’s Commentary
Market Review
In December the Hong Kong equity markets declined after the market had rallied in November. Industrial production growth moderated and the November Consumer Price Index came in slightly below market expectations at 3%. The December flash HSBC Purchasing Manager Index (“PMI”) fell to 50.5 from 50.8 in November, mainly due to slower output growth. With inflation benign, current monetary and fiscal policies are likely to remain in place. During the month, liquidity remained a key market driver as the People’s Bank Of China (“PBOC“) took a hawkish stance by halting reverse repo operations and seven-day repo rates have since surged to about 7%. The PBOC then conducted short-term liquidity operations to inject RMB 300 billion, but this has been insufficient to fully alleviate concerns.
With respect to Hong Kong stocks, buying interest was mainly on Macau names, while the performance of property stocks remained lackluster.
In Taiwan, the government officially lowered the 2014 Gross Domestic Product growth forecast due to weak private consumption, which was suppressed by limited salary increases, and conservative corporate investment budgets. However, export growth remains the key driver; the growth momentum remains tepid as the outlook for major export industries is only moderately positive.
Fund Review
The Fund outperformed the benchmark for the month. Stock selection in industrials and the underweight to financials contributed the most to relative returns, while stock selection in information technology and consumer discretionary detracted. The top two contributors for the month were China Everbright International and Beijing Enterprise. Environmental and clean energy industries continued to be the market focus, with these industries being the key contributors to Fund performance. Conversely, Hand Enterprise and Chipbond Technology detracted from relative performance. There was no material negative news on Hand Enterprise. The valuations remain rich at the current share price level. For Chipbond Technology, the share price was undermined by the brokers’ downgrade on potential margin pressure from its competitors. We remain positive on the company as a more leveraged high resolution television penetration play.
Outlook
In the short term the market is likely to be range bound. On the negative side, A-share markets are likely to weaken on concerns over an increase in equity supply with the resumption of A-share IPOs. In addition, recent liquidity tightening, leading to a surge in short-term money market interest rates, will continue to undermine Chinese equity markets and in particular A-shares. We believe that investors will expect on-going liquidity management by the PBOC that could result in occasional spikes in market interest rates. While the latest release of data on local government debt was within market expectations, this has reinforced investors’ concerns over the control of local government debt. We believe that the problems relating to local government debt are manageable. Market valuations of Chinese equities are low as share prices have largely discounted these concerns. Despite the low valuations, the re-rating upside is likely to be capped in the short term as economic growth continues to be moderate and reform progress will take time.
Despite weaker-than-expected GDP, we expect that the Taiwan stock market will be bolstered by the outlook of steady corporate earnings growth in 2014. We believe that short-term market sentiment will turn positive in January as the impact from disappointing GDP numbers and concerns over the safety of edible oils dissipates.
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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663094902
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China Everbright International, Ltd.
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7,560,065
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22,464,375
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16,846,000
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6.2
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688910900
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Taiwan Semiconductor Manufacturing Co., Ltd.
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13,182,556
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17,316,960
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4,892,000
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4.8
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B3VN92906
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HAND Enterprise Solutions Co., Ltd.
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1,006,498
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13,480,439
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5,361,973
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3.7
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B57JY2909
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China Minsheng Banking Corp., Ltd.
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13,598,065
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13,461,848
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12,137,500
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3.7
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633393905
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Enn Energy Holdings, Ltd.
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478,234
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13,054,882
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1,762,000
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3.6
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B01CT3905
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Tencent Holdings, Ltd.
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5,590,728
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12,678,183
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199,000
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3.5
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608169900
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Beijing Enterprises Holdings, Ltd.
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8,539,048
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11,627,390
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1,177,000
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3.2
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644806002
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Hutchison Whampoa, Ltd.
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8,096,189
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10,517,414
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773,000
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2.9
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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
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9,849,091
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1,838,546
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2.7
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913BMZ902
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Ping An Insurance (Group) Company of China, Ltd.
Access Product (expiration 06/30/15)
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9,494,980
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9,705,823
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1,418,047
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2.7
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B00G0S903
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CNOOC, Ltd.
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10,305,318
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9,596,038
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5,160,000
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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
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8,736,960
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269,000
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2.4
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635186901
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Digital China Holdings, Ltd.
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13,205,899
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8,553,039
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7,256,000
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2.4
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607355906
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China Mobile, Ltd.
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8,371,940
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8,445,244
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816,000
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2.3
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671815900
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Qingling Motors Co., Ltd.
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8,718,221
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8,440,808
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28,960,000
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2.3
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674842901
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Ruentex Development Co., Ltd.
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3,602,401
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8,360,436
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4,310,904
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2.3
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637248907
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MediaTek, Inc.
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6,194,126
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8,318,369
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559,000
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2.3
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620267906
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Advantech Co., Ltd.
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3,787,770
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8,238,244
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1,189,000
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2.3
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658444906
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Merida Industry Co., Ltd.
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6,624,016
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8,179,543
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1,126,000
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2.3
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B1DYPZ905
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China Merchants Bank Co., Ltd.
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8,225,955
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8,153,527
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3,827,000
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2.3
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B2R2ZC908
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CSR Corp., Ltd.
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7,466,210
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8,132,049
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9,930,000
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2.3
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626073902
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Delta Electronics, Inc.
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4,010,493
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8,128,240
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1,425,000
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2.2
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628625907
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Li & Fung, Ltd.
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8,658,196
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7,924,044
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6,132,000
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2.2
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685992000
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Sun Hung Kai Properties, Ltd.
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7,077,680
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6,611,649
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521,000
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1.8
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B58J1S907
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Chailease Holding Co., Ltd.
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6,043,939
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6,518,536
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2,478,000
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1.8
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B1L8PB906
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Tong Hsing Electronic Industries, Ltd.
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5,127,409
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5,570,285
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1,203,000
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1.5
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B236JB905
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Tiangong International Co., Ltd.
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5,449,043
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5,338,595
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18,480,000
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1.5
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BGY6SV906
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China Cinda Asset Management Co., Ltd.
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4,298,751
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4,846,139
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7,796,000
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1.3
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645166901
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Largan Precision Co., Ltd.
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3,937,557
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4,810,509
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118,000
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1.3
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644094906
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Taiwan FamilyMart Co., Ltd.
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525,306
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4,647,259
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742,652
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1.3
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613623909
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Hengan International Group Co., Ltd.
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3,889,897
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4,426,221
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375,500
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1.2
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B633D9904
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Zhongsheng Group Holdings, Ltd.
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3,919,603
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4,119,538
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2,996,500
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1.1
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ACI009HH0
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China Suntien Green Energy Corp., Ltd.
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3,757,730
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4,062,542
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10,825,000
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1.1
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B0Y91C906
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China National Building Material Co., Ltd.
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4,158,278
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4,047,937
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3,750,000
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1.1
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17313X574
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China State Construction Engineering Corp., Ltd.(expiration 01/17/14)
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4,674,320
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3,798,522
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7,375,772
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1.0
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665157905
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Comba Telecom Systems Holdings, Ltd.
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7,565,579
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3,787,590
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10,958,500
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1.0
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B16NHT900
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Shui On Land, Ltd.
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4,155,621
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3,393,379
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11,055,500
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0.9
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|
643055908
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Golden Meditech Holdings, Ltd.
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4,555,715
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3,163,291
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35,040,000
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0.9
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|
643280902
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Chipbond Technology Corp.
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3,949,251
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3,011,881
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1,916,000
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0.8
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993HWH901
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Daqin Railway Co., Ltd. Access Product (expiration 11/02/16)
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2,786,924
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2,969,606
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2,449,968
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0.8
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651795908
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Natural Beauty Bio-Technology, Ltd.
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4,906,910
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2,707,317
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47,710,000
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0.8
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972ZGS900
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Gree Electric Appliances, Inc. Access Product(expiration 06/30/15)
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1,898,593
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2,304,844
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430,249
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0.6
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42751U205
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Hermes Microvision, Inc.
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1,368,073
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1,522,374
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46,900
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0.4
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B1B25Q909
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Daqin Railway Co., Ltd. Access Product (expiration 01/20/15)
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1,246,037
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1,297,183
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1,070,283
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0.4
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BD04NT905
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Integrated Waste Solutions Group Holdings, Ltd.
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7,974,083
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1,119,778
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25,314,000
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0.3
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972ZHB906
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China State Construction Engineering Corp., Ltd. (expiration 07/28/14)
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886,370
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801,260
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1,555,844
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0.2
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|
ACI0090H8
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Zong Su Foods (acquired 09/21/10)
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15,000,034
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--
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2,677
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0.0
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Source: State Street Bank and Trust Company as at Dec 31, 2013.
5
The China Fund, Inc. (CHN)
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The information contained herein has been obtained from sources believed to be reliable but RCM (an Allianz Global Investors company) 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.
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