Attached files
| file | filename |
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| 8-K - CHINA FUND INC | fp0010217_8k.htm |
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Mar 31, 2014
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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 (p.a.)
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5 Years (p.a.)
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10 Years (p.a.)
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Since Inception
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NAV (%)
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-0.97
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-2.26
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-2.26
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10.99
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0.15
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16.66
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12.97
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10.79
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Market price (%)
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-0.55
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-4.32
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-4.32
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8.69
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-1.30
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16.00
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9.88
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9.75
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Benchmark (%)
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-0.54
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-3.30
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-3.30
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5.23
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1.29
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13.88
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8.68
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N/A
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Performance History
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2013
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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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NAV (%)
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17.03
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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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Market price (%)
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11.48
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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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Benchmark (%)
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7.25
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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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Source: State Street Bank and Trust Company. Source for index data: MSCI as at Mar 31, 2014.
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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 Mar 31, 2014.
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* China includes A-shares (0.0%), A-share equity linked securities (8.2%), B-shares (0.0%), H-shares (21.5%) and Red-chips (12.2%).
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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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BEIJING ENTERPRISES HOLDINGS, LTD.
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INDUSTRIALS
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4.2
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CHINA MINSHENG BANKING CORP., LTD.
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FINANCIALS
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3.7 |
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HUTCHISON WHAMPOA, LTD.
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INDUSTRIALS
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3.7 |
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LI & FUNG, LTD.
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CONSUMER DISCRETIONARY
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3.6 |
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TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD.
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I.T. | 3.4 |
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TENCENT HOLDINGS, LTD.
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I.T. | 3.2 |
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HERMES MICROVISION, INC.
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I.T. | 3.1 |
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TONG HSING ELECTRONIC INDUSTRIES
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I.T. | 3.0 |
| DELTA ELECTRONICS, INC. | I.T. | 3.0 |
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PETROCHINA CO., LTD
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ENERGY | 2.9 |
| Total | 33.8 |
Source: State Street Bank and Trust Company as at Mar 31, 2014.
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Fund Details
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NAV
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$22.52
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Market price
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$19.91
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Premium/Discount
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-11.59%
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Market cap
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US$312.23m
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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 Mar 31, 2014.
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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 Mar 31, 2014.
The China Fund Inc. Premium / Discount
Past performance is not a guide to future returns.
Source: State Street Bank and Trust Company as at Mar 31, 2014.
3
The China Fund, Inc. (CHN)
Manager’s Commentary
Market Review
The Chinese equity markets continued to soften for most of the month, until a sharp rebound in the last week of the month on the hope of a relaxation of government policies. The market was pulled down by the disappointing macroeconomic numbers, the broadening of the renminbi trading band and lackluster news from the National People’s Congress (“NPC”) and the second session of the 12th National Committee of the Chinese People's Political Consultative Conference (“CPPCC”). Although Premier Li presented a highly ambitious list of government intentions – maintaining growth, controlling inflation, creating 10 million new jobs, reining in pollution and tackling growing financial risks – the markets were clearly disappointed. There were few specific details provided and limited progress on the much-needed reform agenda. The message is clear; markets are looking for action not words.
Stocks relating to the internet, environment and clean energy finally pulled back after, in general, announcing lackluster earnings.
In Taiwan, the reported economic data for January was weak due to the Chinese New Year holidays that dragged on exports and overall production activities. However, retail sales and consumer confidence has continued to strengthen, due to the holiday effect and a better stock market outlook.
Fund Review
The Fund underperformed the benchmark for the month. Stock selection in the information technology and energy sectors detracted the most in relative terms, while stock selection in consumer discretionary helped. Li & Fung and Hermes Microvision were among the top contributors for the month. The surge in share price of Li & Fung was triggered by the announcement of better than expected 2013 earnings results and the spin-off of its distribution business. Hermes Microvision will likely benefit from the increasing demand for semiconductor wafer inspection tools, and the company was re-rated by the market on the promising outlook. Conversely, the main detractors were China Suntien Green Energy and Taiwan Semiconductor Manufacturing Company. China Suntien Green Energy posted worse than expected earnings as a result of delays in the rollout of new wind farm capacity. However, we remain positive on the company, which should be in a position to benefit from strong gas sales volume growth in the medium term. The Fund’s underweight in Taiwan Semiconductor Manufacturing Company detracted as the share price was helped by the strong demand for chips used in mobile devices.
During the month, the Fund initiated a position on Epistar, a manufacturer of light-emitting diodes (“LEDs”) in Taiwan. Epistar is positioned to benefit from acceleration in LED lighting demand, while global supply will increase at a more measured pace; resulting in a more favorable environment for LED suppliers.
Outlook
We believe that Chinese equities will recover in the medium term. Share prices have been discounted as a result of concerns over the economic slowdown in China as well as the potential systemic risk in the Chinese banking system. The recovery in the global economy supports the positive medium term market outlook. Valuations remain very compelling.
In Taiwan, we continue to prefer the technology sector based on lower valuations and signals of a global IT recovery, but also remain selective in the non-tech sectors.
Source : RCM Asia Pacific Limited as at March 31, 2014.
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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608169900
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Beijing Enterprises Holdings, Ltd.
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12,981,142
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15,084,056
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1,683,500
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4.2
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B57JY2909
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China Minsheng Banking Corp., Ltd.
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14,491,196
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13,066,047
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13,027,000
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3.7
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644806002
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Hutchison Whampoa, Ltd.
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10,763,479
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12,921,649
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975,000
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3.7
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628625907
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Li & Fung, Ltd.
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12,020,152
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12,614,237
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8,538,000
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3.6
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688910900
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Taiwan Semiconductor Manufacturing Co., Ltd.
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8,470,505
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12,121,419
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3,115,000
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3.4
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B01CT3905
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Tencent Holdings, Ltd.
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4,429,340
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11,288,342
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162,300
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3.2
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B3WH02907
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Hermes Microvision, Inc.
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7,867,215
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10,776,784
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269,000
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3.1
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B1L8PB906
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Tong Hsing Electronic Industries, Ltd.
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9,584,674
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10,690,502
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2,067,000
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3.0
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626073902
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Delta Electronics, Inc.
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5,764,359
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10,637,025
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1,723,000
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3.0
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622657906
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PetroChina Co., Ltd.
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9,815,518
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10,418,771
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9,564,000
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2.9
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B01FLR903
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Ping An Insurance (Group) Company of China, Ltd.
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9,814,375
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9,562,001
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1,153,500
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2.7
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607355906
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China Mobile, Ltd.
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10,113,679
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9,295,194
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1,015,500
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2.6
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637248907
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MediaTek, Inc.
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7,101,686
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9,254,954
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627,000
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2.6
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671815900
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Qingling Motors Co., Ltd.
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8,718,221
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8,736,442
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28,960,000
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2.5
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635186901
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Digital China Holdings, Ltd.
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14,515,900
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8,667,102
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8,597,000
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2.5
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17313A533
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Gree Electric Appliances, Inc. Access Product (expiration 01/16/15)
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6,453,442
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8,367,223
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1,838,546
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2.4
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B2R2ZC908
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CSR Corp., Ltd.
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7,466,210
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8,346,743
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9,930,000
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2.4
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B1DYPZ905
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China Merchants Bank Co., Ltd.
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9,119,882
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7,827,113
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4,312,000
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2.2
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B00G0S903
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CNOOC, Ltd.
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10,305,318
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7,756,547
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5,160,000
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2.2
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658444906
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Merida Industry Co., Ltd.
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6,624,016
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7,469,075
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1,126,000
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2.1
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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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6,380,894
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521,000
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1.8
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B1G1QD902
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Industrial & Commercial Bank of China, Ltd.
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6,201,503
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6,103,362
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9,925,000
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1.7
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674842901
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Ruentex Development Co., Ltd.
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2,674,949
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6,057,731
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3,311,904
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1.7
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674347901
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Semiconductor Manufacturing International Corp.
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7,943,834
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5,959,305
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79,698,000
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1.7
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|
620267906
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Advantech Co., Ltd.
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2,851,925
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5,888,843
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908,000
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1.7
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|
645166901
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Largan Precision Co., Ltd.
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3,937,557
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5,579,837
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118,000
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1.6
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|
663094902
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China Everbright International, Ltd.
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1,742,461
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5,479,259
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4,002,000
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1.6
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|
B58J1S907
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Chailease Holding Co., Ltd.
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5,196,680
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5,117,780
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2,132,000
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1.4
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|
B0Y91C906
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China National Building Material Co., Ltd.
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5,073,552
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4,643,878
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4,630,000
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1.3
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|
B236JB905
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Tiangong International Co., Ltd.
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5,449,044
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4,455,165
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18,480,000
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1.3
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|
ACI009HH0
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China Suntien Green Energy Corp., Ltd.
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4,612,718
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4,268,946
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12,785,000
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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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4,141,229
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2,996,500
|
1.2
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|
17313X574
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China State Construction Engineering Corp., Ltd. Access Product (expiration 01/16/15)
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4,674,320
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3,488,740
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7,375,772
|
1.0
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|
635415904
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Epistar Corp.
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3,471,633
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3,451,861
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1,438,000
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1.0
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|
ACI07WMD5
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China International Travel Service Corp., Ltd. Access Product
(expiration 08/25/15)
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3,801,918
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3,386,758
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626,632
|
1.0
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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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3,600,309
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3,308,609
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541,933
|
0.9
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|
B45BF9907
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Sanan Optoelectronics Co., Ltd. Access Product
(expiration date 02/15/16)
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3,541,260
|
3,223,950
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871,809
|
0.9
|
|
613623909
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Hengan International Group Co., Ltd.
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3,200,872
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3,214,004
|
309,500
|
0.9
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|
ACI07LD80
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Dongxu Optoelectronic Technology Co., Ltd. Access Product
(expiration 06/30/15)
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2,846,947
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3,137,635
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962,760
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0.9
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B16NHT900
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Shui On Land, Ltd.
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4,155,621
|
3,092,846
|
11,055,500
|
0.9
|
|
665157905
|
Comba Telecom Systems Holdings, Ltd.
|
7,565,579
|
2,896,178
|
10,958,500
|
0.8
|
|
B688XD907
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Beijing Jingneng Clean Energy Co., Ltd.
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3,525,009
|
2,865,716
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6,244,000
|
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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2,660,175
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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.
|
4,906,910
|
2,552,570
|
47,710,000
|
0.7
|
|
42751U205
|
Hermes Microvision, Inc. GDR
|
1,368,073
|
1,877,876
|
46,900
|
0.5
|
|
644094906
|
Taiwan FamilyMart Co., Ltd.
|
165,024
|
1,650,878
|
247,652
|
0.5
|
|
B1B25Q909
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Daqin Railway Co., Ltd. Access Product (expiration 01/20/15)
|
1,246,037
|
1,162,327
|
1,070,283
|
0.3
|
|
ACI0090H8
|
Zong Su Foods
|
15,000,034
|
0
|
2,677
|
0.0
|
Source: State Street Bank and Trust Company as at Mar 31, 2014.
5
The China Fund, Inc. (CHN)
|
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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