Attached files
| file | filename |
|---|---|
| 8-K - CHINA FUND INC | fp0012611_8k.htm |
Data as of 11/30/14
Manager’s Commentary
Market Review
While the Hang Seng Index ended flat for the month, the Hang Seng China Enterprises Index was up over 3% (in local terms). The performance gap was mainly attributable to the robust performance of China's domestic equity markets. The offshore Chinese/Hong Kong equity market was initially undermined by the lukewarm response to the Shanghai-Hong Kong Connect scheme, but subsequently lifted because of the surprise interest rate cut announced by the People's Bank of China on November 21,2014. Several rounds of targeted monetary easing including a Standing Lending Facility and a Mid-term Lending Facility have not been able to work their way through to support the real economy. Interest rate sensitive sectors such as Chinese property and insurance, as well as brokers, outperformed in the last week of November. Hong Kong stocks were relatively out of favor as weak gross gaming revenue numbers continued to weigh on casino stocks.
In Taiwan, export order growth accelerated further from 12.7% year on year for September to 13.4% year on year for October, boosted by strong demand from the United States and Europe, as well as ASEAN countries. Despite the ruling party's loss in the Taipei election, the market had already priced in the event and investors tended to buy on the weakness. Strong market sentiment for the United States and China also supported the market.
Fund Review
The China Fund, Inc. (the "Fund") underperformed the MSCI Global Dragon Index (the "benchmark index") for the month. Stock selection in the information technology sector was the largest detractor from relative returns, while the stock selection in consumer staples contributed. Two of the main contributors for the month were China Minsheng Banking, a bank in China with a focus on loans to small-medium enterprises, and Natural Beauty, a company providing skin treatments through its beauty centers in China. China Minsheng's share price was driven by a consultation paper regarding the introduction of a deposit insurance system. In the long run, we expect this to be positive for the banking industry as it is likely to reduce financial risks and urge Chinese banks to improve profitability and operating efficiency. With respect to Natural Beauty, the share price was supported by a turnaround in earnings and increased dividend payout. Conversely, the main detractors for the month were Li & Fung, an export trading and sourcing company, and Comba Telecom Systems, a Chinese company providing wireless infrastructure and solutions to mobile operators and enterprises. The share price of Li & Fung was undermined by concerns over weak sales particularly in Europe, despite the fact its exposure to Europe is relatively small. However, we believe that its cash flow will improve and with its asset-light model, the company should be able to deliver strong cash flows to support a higher dividend payment. The share price of Comba fell after a strong run in the past few months. The company also issued clarification on allegations that a former employee offered bribes.
Key Transaction
The key transaction for the month was the initiation of exposure to Haitong Securities. We believe the company will benefit largely from the Shanghai -Hong Kong Connect scheme over the medium term and the stronger turnover in A-shares market.
Outlook
Expectations of monetary easing including a cut in the reserve requirement ratio (RRR) and relaxation of the loan-deposit ratio will continue to drive the Hong Kong equity market, particularly Chinese stocks. We believe that the current policy easing is unlikely to have a significant positive impact on economic growth. Hence, we remain cautious on cyclical stocks including materials, commodities and energy. However, the expectations of further interest rate cuts will drive liquidity into the A-share markets and this will have a positive spill over effect into H-shares. As a result, we believe the financial sector will lead the market rally in the short/medium term and hence we would selectively increase exposure to the sector.
In Taiwan, assuming a strong US dollar environment, we would continue to favor the technology sector but we are cautious about companies that have major competitors in Japan and Korea. Also, we remain focused on stocks with quality and better earnings visibility.
In Brief
Fund Data
|
Description
|
Seeks to achieve longterm capital appreciation through investments in China companies.
|
|
Listing Date (NYSE)
|
July 10, 1992
|
|
Total Fund Assets (millions)
|
$380.5
|
|
Median Market Cap (in billions)
|
$5.4
|
|
Distribution Frequency
|
Annual
|
|
Management Firm
|
Allianz Global Investors U.S. LLC
|
|
Portfolio Management
|
Christina Chung, CFA Lead Portfolio Manager
|
Performance (US$ Returns)
(as of 11/30/14)
|
Fund
|
Benchmark1
|
|
|
One Month
|
0.25%
|
1.32%
|
|
Three Months
|
-2.06%
|
-1.42%
|
|
One Year
|
6.19%
|
7.83%
|
|
Three Years % pa
|
11.53%
|
13.77%
|
|
Net Asset Value / Market Price
|
|
|
Net Asset Value (NAV) / Market Price at Inception
|
$13.15 / $14.26
|
|
NAV / Market Price (as of 11/30/14)
|
$24.27 / $21.92
|
|
High / Low Ranges (52-Week)
|
|
|
High / Low NAV
|
$26.60 / $21.65
|
|
High / Low Market Price
|
$23.61 / $19.20
|
|
Premium/Discount to NAV (as of 11/30/14)
|
-9.68%
|
|
Fund Data (Common Shares)
|
|
|
Shares Outstanding
|
15,682,028
|
|
Average Daily Volume
|
43,615
|
|
Expense Ratio
|
1.30%
|
Fund Managers
Christina Chung, CFA
Lead Portfolio
Manager
1.MSCI Golden Dragon Index.
The China Fund, Inc.
Investment Objective
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.
Average Annual Returns
|
1 Month
|
3 Month
|
YTD
|
1 Year
|
3 Year
|
5 Year
|
10 Year
|
Inception
|
|
|
NAV
|
0.25%
|
-2.06%
|
5.34%
|
6.19%
|
11.53%
|
7.16%
|
14.36%
|
10.87%
|
|
Market Price
|
2.24%
|
-1.13%
|
5.33%
|
8.24%
|
10.00%
|
6.57%
|
10.84%
|
9.97%
|
|
MSCI Golden Dragon Index
|
1.32%
|
-1.42%
|
9.20%
|
7.83%
|
13.77%
|
6.57%
|
9.45%
|
—
|
Calendar Year Returns
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
|
|
NAV
|
57.10%
|
86.20%
|
-46.95%
|
72.83%
|
27.26%
|
-24.37%
|
12.12%
|
18.31%
|
|
Market Price
|
65.68%
|
50.24%
|
-40.65%
|
72.19%
|
23.60%
|
-27.51%
|
20.52%
|
12.70%
|
|
MSCI Golden Dragon Index
|
39.50%
|
37.97%
|
-49.37%
|
67.12%
|
13.60%
|
-18.35%
|
22.65%
|
7.25%
|
Past performance is not a guide to future returns.
Returns are annualized, except for periods or less than one year.
Source: State Street Bank and Trust Company. Source for index data: MSCI as at November 30, 2014. Investment returns are historical and do not guarantee future results. Investment returns reflect changes in net asset value and market price per share during each period and assumes that dividends and capital gains distributions, if any, were reinvested. The net asset value (NAV) percentages are not an indication of the performance of a shareholder's investment in the Fund, which is based on market price. NAV performance includes the deduction of management fees and other expenses. Market price performance does not include the deduction of brokerage commissions and other expenses of trading shares and would be lower had such commissions and expenses been deducted. It is not possible to invest directly in an index.
Premium/Discount
|
Sector Allocation
|
||
|
Fund
|
Benchmark1
|
|
|
Information Technology
|
29.87%
|
23.31%
|
|
Financials
|
23.20%
|
37.95%
|
|
Industrials
|
11.42%
|
6.20%
|
|
Consumer Discretionary
|
11.40%
|
6.86%
|
|
Energy
|
4.05%
|
5.53%
|
|
Telecom Services
|
3.56%
|
7.20%
|
|
Consumer Staples
|
2.80%
|
3.03%
|
|
Health Care
|
1.54%
|
1.13%
|
|
Materials
|
1.05%
|
3.90%
|
|
Utilities
|
0.00%
|
4.82%
|
|
Other assets & liabilities
|
11.10%
|
0.00%
|
Source: IDS GmbH - Analysis and Reporting Services, a subsidiary of Allianz SE.
|
Country Allocation
|
||
|
Fund
|
Benchmark1
|
|
|
China
|
63.70%
|
71.27%
|
|
Hong Kong Red Chips
|
12.30%
|
13.07%
|
|
Hong Kong 'H' shares
|
18.70%
|
24.80%
|
|
Equity linked securities ('A' shares)
|
8.30%
|
0.00%
|
|
China 'A' & 'B' shares
|
0.00%
|
0.20%
|
|
Other Hong Kong securities
|
24.40%
|
33.20%
|
|
Taiwan
|
24.50%
|
28.73%
|
|
Other assets & liabilities
|
11.80%
|
0.00%
|
|
Top 10 Holdings
|
|
|
CHINA MINSHENG BK (China)
|
5.15%
|
|
CHINA MOBILE LTD (China)
|
3.56%
|
|
BEIJING ENTERPRISES HLDG (China)
|
3.33%
|
|
HONG KONG EXCHANGES AND CLEARING LTD (H.K.)
|
3.33%
|
|
TAIWAN SEMIC CO LTD (Taiwan)
|
3.21%
|
|
SUN HUNG KAI PROPERTIES LTD (H.K.)
|
3.05%
|
|
DELTA ELECTRONICS INC (Taiwan)
|
2.76%
|
|
LI & FUNG LTD (H.K.)
|
2.74%
|
|
CSR CORP LTD (China)
|
2.63%
|
|
QINGLING MOTORS CO LTD (China)
|
2.55%
|
|
Portfolio Characteristics
|
||
|
Fund
|
Benchmark1
|
|
|
P/E Ratio
|
12.78
|
11.60
|
|
P/B Ratio
|
1.78
|
1.43
|
|
Issues in Portfolio
|
48
|
280
|
|
Foreign Holdings (%)
|
88.90
|
100.00
|
|
Cash (%)
|
11.10
|
0.00
|
|
Yield (%)
|
2.58
|
2.88
|
|
1.
|
MSCI Golden Dragon Index.
|
The China Fund, Inc.
Distribution History (10 Year)
|
Declaration Date
|
Ex-dividend Date
|
Record Date
|
Payable Date
|
Distribution/
Share
|
Income
|
Long-term Capital Gain
|
Short-term Capital Gain
|
|
12/13/04
|
12/20/04
|
12/22/04
|
1/7/05
|
$3.57010
|
$0.19630
|
$3.26640
|
$0.10740
|
|
12/9/05
|
12/19/05
|
12/21/05
|
12/29/05
|
$2.51190
|
$0.21720
|
$2.29470
|
—
|
|
12/8/06
|
12/19/06
|
12/21/06
|
12/29/06
|
$4.01170
|
$0.29960
|
$2.73090
|
$0.98120
|
|
12/7/07
|
12/19/07
|
12/21/07
|
1/25/08
|
$12.12000
|
$0.28000
|
$9.00000
|
$2.84000
|
|
12/8/08
|
12/22/08
|
12/24/08
|
1/23/09
|
$5.81740
|
$0.48130
|
$5.33610
|
—
|
|
12/9/09
|
12/22/09
|
12/24/09
|
12/29/09
|
$0.25570
|
$0.25570
|
—
|
—
|
|
12/8/10
|
12/21/10
|
12/24/10
|
12/29/10
|
$2.27420
|
$0.37460
|
$1.89960
|
—
|
|
12/8/11
|
12/21/11
|
12/23/11
|
12/29/11
|
$2.99640
|
$0.17420
|
$2.82220
|
—
|
|
12/10/12
|
12/20/12
|
12/24/12
|
12/28/12
|
$3.25170
|
$0.34730
|
$2.90440
|
—
|
|
12/13/13
|
12/19/13
|
12/23/13
|
12/27/13
|
$3.31400
|
$0.43870
|
$2.87530
|
—
|
Distribution/Share includes Income, Long-term Capital gains and Short-term Capital gains.
The China Fund NAV Performance of $10,000 since inception (with dividends reinvested at NAV price)
Past performance is not a guide to future returns.
Index Description
MSCI Golden Dragon Index
The MSCI Golden Dragon Index captures the equity market performance of large and mid cap China securities (H shares, B shares, Red-Chips and P-Chips) and non-domestic China securities listed in Hong Kong and Taiwan.
It is not possible to invest directly in an index.
The China Fund, Inc.
Portfolio in Full
| Sector |
Company
(exchange ticker) |
Market Price
|
Holding
|
Value US$
|
% of net assets
|
|
Information Technology
|
29.85
|
||||
|
TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD
|
2330
|
141.50
|
2,647,000
|
12,102,771
|
3.21
|
|
DELTA ELECTRONICS INC
|
2308
|
187.00
|
1,723,000
|
10,411,213
|
2.76
|
|
TENCENT HOLDINGS LTD
|
700
|
124.00
|
566,300
|
9,055,016
|
2.40
|
|
HERMES MICROVISION INC
|
3658
|
1,470.00
|
182,000
|
8,644,963
|
2.29
|
|
DIGITAL CHINA HOLDINGS LTD
|
861
|
7.22
|
8,937,000
|
8,320,510
|
2.20
|
|
TONG HSING ELECTRONIC INDUSTRIES LTD
|
6271
|
118.50
|
2,067,000
|
7,914,678
|
2.10
|
|
SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORP
|
981
|
0.79
|
74,108,000
|
7,549,413
|
2.00
|
|
LARGAN PRECISION CO LTD
|
3008
|
2,385.00
|
96,000
|
7,398,336
|
1.96
|
|
ASM PACIFIC TECHNOLOGY LTD
|
522
|
78.95
|
646,600
|
6,582,772
|
1.74
|
|
COMBA TELECOM SYSTEMS HOLDINGS LTD
|
2342
|
3.03
|
12,264,999
|
4,792,158
|
1.27
|
|
ADVANTECH CO LTD
|
2395
|
212.00
|
694,841
|
4,759,877
|
1.26
|
|
CATCHER TECHNOLOGY CO LTD
|
2474
|
262.00
|
550,000
|
4,656,273
|
1.23
|
|
PRIMAX ELECTRONICS LTD
|
4915
|
39.15
|
3,174,000
|
4,015,255
|
1.06
|
|
MEDIATEK INC
|
2454
|
465.00
|
227,000
|
3,410,776
|
0.90
|
|
EPISTAR CORP
|
2448
|
58.20
|
1,812,000
|
3,407,655
|
0.90
|
|
CITIGROUP GLOBAL MARKETS HLDG (exch. for HANGZHOU HIKVISION DIGI)
|
N/A
|
3.15
|
1,071,208
|
3,375,376
|
0.89
|
|
GOLDPAC GROUP LTD
|
3315
|
6.35
|
4,042,000
|
3,309,718
|
0.88
|
| HERMES MICROVISION GDR REG S |
97457816
|
47.42
|
46,900
|
2,223,764
|
0.59
|
|
CLSA FINANCIAL PRODUCT WTS (exch. for HANGZHOU HIKVISION DIGI)
|
N/A
|
3.15
|
242,449
|
763,957
|
0.20
|
|
Financials
|
23.19
|
||||
|
CHINA MINSHENG BANKING CORP LTD
|
1988
|
8.50
|
17,746,100
|
19,451,041
|
5.15
|
|
HONG KONG EXCHANGES AND CLEARING LTD
|
388
|
168.90
|
576,300
|
12,551,605
|
3.33
|
|
SUN HUNG KAI PROPERTIES LTD
|
16
|
113.40
|
788,000
|
11,522,860
|
3.05
|
|
CATHAY FINANCIAL HOLDING CO LTD
|
2882
|
49.90
|
5,688,000
|
9,171,377
|
2.43
|
|
INDUSTRIAL & COMMERCIAL BANK OF CHINA LTD
|
1398
|
5.25
|
13,451,000
|
9,106,152
|
2.41
|
|
PING AN INSURANCE GROUP CO OF CHINA LTD
|
2318
|
64.95
|
1,015,500
|
8,505,113
|
2.25
|
|
CHAILEASE HOLDING CO LTD
|
5871
|
79.50
|
2,328,200
|
5,980,835
|
1.58
|
|
CLSA FINANCIAL PRODUCTS LTD (exch. for PING AN INSURANCE(GROUP)
|
N/A
|
8.09
|
541,933
|
4,384,401
|
1.16
|
|
HAITONG SECURITIES CO LTD
|
6837
|
16.50
|
1,653,600
|
3,518,321
|
0.93
|
|
SHUI ON LAND LTD
|
272
|
1.92
|
13,467,000
|
3,334,211
|
0.88
|
|
Industrials
|
11.42
|
||||
|
BEIJING ENTERPRISES HOLDINGS LTD
|
392
|
61.85
|
1,578,000
|
12,585,420
|
3.33
|
|
CSR CORP LTD
|
1766
|
7.89
|
9,765,000
|
9,935,054
|
2.63
|
|
CHINA EVERBRIGHT INTERNATIONAL LTD
|
257
|
11.90
|
6,048,000
|
9,280,679
|
2.46
|
|
HUTCHISON WHAMPOA LTD
|
13
|
97.25
|
587,000
|
7,361,202
|
1.95
|
|
CLSA FINANCIAL PRODUCTS WTS (exch. for ZHENGZHOU YUTONG BUS CO)
|
N/A
|
3.04
|
1,297,127
|
3,947,157
|
1.05
|
|
Consumer Discretionary
|
11.42
|
||||
|
LI & FUNG LTD
|
494
|
8.63
|
9,282,000
|
10,329,359
|
2.74
|
|
QINGLING MOTORS CO LTD
|
1122
|
2.58
|
28,960,000
|
9,634,724
|
2.55
|
|
MERIDA INDUSTRY CO LTD
|
9914
|
212.00
|
1,323,000
|
9,062,961
|
2.40
|
|
CLSA FINANCIAL PRODUCTS LTD (exch. for CHINA INTL TRAVEL SERVI)
|
N/A
|
6.86
|
626,632
|
4,296,377
|
1.14
|
|
CITIGROUP GLOBAL MARKETS WTS (exch. for GREE ELECTRICAL APP INC)
|
N/A
|
4.94
|
676,267
|
3,339,406
|
0.88
|
|
ZHONGSHENG GROUP HOLDINGS LTD
|
881
|
7.90
|
3,163,500
|
3,222,671
|
0.85
|
|
DONGFENG MOTOR GROUP CO LTD
|
489
|
11.84
|
2,108,000
|
3,218,424
|
0.85
|
|
Energy
|
4.06
|
||||
|
PETROCHINA CO LTD
|
857
|
8.41
|
7,750,000
|
8,404,632
|
2.23
|
|
CNOOC LTD
|
883
|
11.34
|
2,639,000
|
3,858,988
|
1.02
|
|
CHINA SUNTIEN GREEN ENERGY CORP LTD
|
956
|
1.85
|
12,785,000
|
3,049,955
|
0.81
|
|
Telecom Services
|
3.56
|
||||
|
CHINA MOBILE LTD
|
941
|
95.50
|
1,092,500
|
13,453,826
|
3.56
|
|
Consumer Staples
|
2.80
|
||||
|
NATURAL BEAUTY BIO-TECHNOLOGY LTD
|
157
|
0.77
|
50,320,000
|
4,996,344
|
1.32
|
The China Fund, Inc.
Portfolio in Full
|
Sector
|
Company
(exchange ticker)
|
Market Price
|
Holding
|
Value US$
|
% of net assets
|
|
CITIGROUP GLOBAL MARKETS HOLD (exch. for SHANGHAI JAHWA UNITED)
|
N/A
|
5.74
|
513,350
|
2,944,062
|
0.78
|
|
CLSA FINANCIAL PRODUCTS WTS (exch. for SHANGHAI JAHWA UNITED)
|
N/A
|
5.74
|
460,100
|
2,638,674
|
0.70
|
|
Health Care
|
1.54
|
||||
|
CITI ACCESS (exch. for JIANGSU HENGRUI MEDICINE)
|
N/A
|
5.81
|
696,350
|
4,045,794
|
1.07
|
|
CLSA FINANCIAL PRODUCTS LTD (exch. for JIANGSU HENGRUI MEDICINE)
|
N/A
|
5.81
|
307,087
|
1,785,619
|
0.47
|
|
Materials
|
1.05
|
||||
|
TIANGONG INTERNATIONAL CO LTD
|
826
|
1.66
|
18,480,000
|
3,955,770
|
1.05
|
Source: State Street Bank and Trust Company, IDS GmbH-Analysis and Reporting Services, a subsidiary of Allianz SE.
Important Information:
Holdings are subject to change daily. 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 information contained herein has been obtained from sources believed to be reliable but Allianz Global Investors U.S. LLC 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 the Fund's holdings, performance and strategies. 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 by a closed-end fund, its shares can be purchased and sold on the open market through a stock exchange, where shares may trade at a premium or a discount. The market price of holdings is subject to change daily.
P/E is a ratio of security price to earnings per share. Typically, an undervalued security is characterized by a low P/E ratio, while an overvalued security is characterized by a high P/E ratio. P/B is a ratio of the current stock price to the book value. This is used to identify undervalued stocks. Dividend yield is the annual percentage of return earned by an investor on a common or preferred stock. The average dividend yield is the dividend rate divided by current share price.
©2014 Allianz Global Investors Distributors LLC.
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Investment Products: Not FDIC Insured | May Lose Value | Not Bank Guaranteed
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AGI-2014-12-15-11166 | FS-CHN-1114
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