Jpmorgan Chinese Investm... Investors - JMC

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Stock Name Stock Symbol Market Stock Type
Jpmorgan Chinese Investment Trust Plc JMC London Ordinary Share
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loganair: In a bid to broaden the Company's investor base and so reduce the discount over the longer term, the Board is proposing to pay an annual dividend of 4% per annum in the future, payable in four quarterly instalments. In order to pay this, any shortfall on the dividend income received from the underlying investments of the portfolio will be paid out of the capital growth of the portfolio. The first two quarterly payments of 1% each will be made in June and September 2020, based on the NAV as at 31st March 2020.
loganair: This is exactly what JP Morgan did with their Asian Fund (JAI) a few years back, paying a dividend of 4% of Nav per year and paying a dividend 4 times per year, giving a 300% increase in the dividend yield. The only difference is JAI did not change their name. What seems to me to be happening is, as interest rates are so low to negative JP Morgan are hoping to attract more investors to buy in rather then to sell out thereby increasing the share price more than would have otherwise been the case. What JP Morgan also seem to be doing is to make JMC more like a pension annuity, except at the end of the day the capital always remains the investors instead of the annuity being lost when the person sadly passes on.
loganair: Mark Mobius tilts towards China, South Korea and is also bullish on Brazil and Russia where consumer Discretionary goods and services benefiting from domestic consumption growth in these countries. "The opportunities are incredible for the right investment." He remains optimistic in the emerging markets of Vietnam, China and India and believes we're going to see lot's of opportunities in these markets down the road especially India has got tremendous opportunities. Mobius also small- and mid-size mainland Chinese companies public in Hong Kong. Fintech is a focus area, as is firms that assist traditional corporations to better deploy internet technologies. "That's where the growth opportunities are," he said. "China is now a huge market, and it's growing because we are now getting more and more access," he said. “With the A-share market coming into the availability of foreign investors, the opportunities are incredible”. He also says he expects a 30% correction in the US market as a result of massive out flows from ETF's. Currently global ETF stock assets stand at $4.7 trillion.
loganair: As Emerging Markets Sell Off, the Biggest One's Doing Fine by Richard Frost and Tian Chen: Within a chorus of warnings about the threats facing emerging markets, little is being said about the largest of them all. And with everything else that’s going on, why would you worry about China? Stocks are up this month in Shanghai, the yuan is at a two-year high against a basket of peers, and bonds are about as prized relative to Treasuries as they’ve been since 2016. A similar picture exists outside of financial assets, with the economy growing at a steady clip and domestic demand supporting imports -- including from emerging peers. That’s the sort of stability that’s been hard to come by in some developing markets, where even superfan Mark Mobius sees more pain to come. Yet the country isn’t immune to what’s afflicting investors from Buenos Aires to Ankara. The People’s Bank of China has been following the Federal Reserve (albeit at a slower pace) with higher interest rates; a deleveraging campaign is another form of tightening that risks slower growth and more corporate defaults; and an unpredictable trade war with the U.S. poses a threat to exports and economic confidence. “China’s financial markets are enjoying support from strong fundamentals and they are not that sensitive to global volatility," said Shen Jianguang, chief Asia economist at Mizuho Securities in Hong Kong. “The biggest latent risk to the markets is the trade war, which I don’t think is going to be simple to resolve."
loganair: Great expectations by Marina Gerner: So what is the outlook for the BRICS? Stammers says that, ultimately, China and India are looking to become leading global providers of goods and services, so they make things. In contrast, Russia and Brazil are expected to become the global giants in commodities, so they provide the basic raw materials needed to make those things. Paul McNamara, an investment director and lead manager on emerging market bond, currency and hedge fund strategies at GAM, says: ‘China and India matter a lot; the other two are secondary.’ All the BRICS countries face different obstacles. ‘Russia is crippled by dysfunctional institutions and corruption, but Brazil is slightly better off,’ comments McNamara. Redwood says Russia has ‘suffered a setback from the lower oil price, which has hit its export earnings and tax revenues, and from Western actions, which have made some trade and transactions more difficult’. Redwood observes that Brazil has been through a bad political and economic crisis, with recession, high inflation and difficult corruption problems forcing changes of government. He says: ‘There is now some hope of recovery, but there remain deep-seated economic and political problems to resolve fully.’ South Africa too has been suffering from political instability and failing economic policies. ‘Future sustained progress in both Brazil and South Africa will need stable reform-oriented governments that can shake off the problems of the past,’ he adds. India has become the poster child for reform-led recovery in emerging markets, argues James Penny, senior investment manager at TAM Asset Management. ‘With the appointment of prime minster Modi, the country has been put on a path of steep and deep economic and government reform to bring its economy and vast middle-class population to the forefront in the modern market.’ ‘India has scope to become one of the world’s largest economies, but it still has a lot further to go to increase incomes per head.’ Moreover, South Africa, Russia and to some extent Brazil rely on mining and the production of oil and commodities, whereas China and India are more dependent on imports of raw materials. Dominant China: However, Penny says the biggest and, on the global stage, the loudest of the BRICS nations remains China. The country continues to make headlines speculating about whether its economy could suffer a ‘hard landing’ in the face of its highly leveraged corporate sector and a fall in GDP to 6 per cent. But he is keen to put these figures in context: ‘Let’s be clear here,’ he says. ‘The US is struggling to find 4 per cent GDP growth, the UK is looking at 1.5 per cent, and the world is worrying about a Chinese slowdown to 6 per cent GDP growth?’ -China, not India, will dominate future Asian growth: The growth rates of the BRICS economies, with the possible exception of India’s, over the next 10 years is likely to be about half that of the previous decade, according to Smith. India’s and China’s shares of global GDP growth will probably be smaller, but the countries will remain dominant. ‘China will remain the largest [BRICS] economy and should continue to command investors’ attention,’ he says. ‘But if India opens up and reforms, investors should begin to devote more of their attention to the subcontinent.’ That said, he points out that, given the relative size of the two economies today, it would still take more than 30 years for India’s GDP to exceed China’s, even if India achieves all its reform goals and China achieves few of its aims. Ultimately, the strength of the BRICS as an investment proposition is their very diversity, argues Ballard. ‘They are so different that they provide an element of diversification beneficial for any long term investor.’
loganair: Can emerging markets maintain their momentum? By Graham Smith: When markets surprise, they have a habit of doing so in a big way. This wasn’t supposed to be a great year for emerging markets but, so far, it has been. The MSCI Emerging Markets Index went up by almost a third in US dollar terms over the ten months to the end of October¹. Rising interest rates in the US have the potential to apply a substantial headwind to emerging markets. They make it relatively more attractive for global investors to plant their money in US assets and avoid the additional risks associated with smaller, developing countries. At the same time, higher US rates make it more expensive for nations dependent on foreign loans to service their existing debts and borrow more. As always though, we find ourselves somewhere between two big pulls. On the other end of the rope this time is economic growth. In a developed world where growth of 2% to 3% is considered strong enough to withstand rises in interest rates, the International Monetary Fund’s expectation that emerging markets will continue to grow at a rate of about 5% per annum looks impressive². So where is the growth coming from? For a start, China seems on course to expand by about 7% this year. While that’s a big step down from the 10% growth rate we saw earlier this decade, it’s still enough to belie some extraordinary progress. Online sales of physical goods were 29% higher in the nine months to September compared with the same period in 2016.³ That’s good news for the host of nearby countries that send exports to China. Malaysia, for instance, which sells components used in the latest generation Apple and Samsung smartphones, said last week that exports to China were up 27% year-on-year in September⁴. Then there’s Brazil, in a much weaker position, but with prospects improving. Following a damaging two-year-long recession, a rebound in consumer spending stabilised the economy in the first half of this year ⁵. India, almost the world’s fastest growing large economy in fiscal 2016-17, has slowed as the country absorbs the combined impacts of last year’s cancellation of high value bank notes and the introduction this year of a national goods and services tax. However, these effects are only expected to be transitory, turning positive for the economy longer run according to the World Bank⁶. Since corporate earnings have broadly grown in step with stock market gains this year, emerging markets continue to look attractively valued on a relative basis. At the end of last month, the MSCI Emerging Markets Index traded on 16 times the earnings of the companies it represents, and at a 23% discount to world markets generally. That valuation gap is more or less maintained when using forecast earnings – 13 times for emerging markets versus 17 times for the world⁷. You could, perhaps, explain away these mismatches by the risks that remain. Capital has continued to flow into emerging markets, even as US interest rates have gone up. As in the period 2003 to 2006, emerging markets are enduring rising rates, partly because those rises have coincided with healthy global growth⁸. However, that could still be undone by any factor that sees the US dollar returning to favour, particularly if that factor involves a rise in geopolitical stress or unexpected deterioration in the world growth outlook. That would place renewed pressure particularly on countries with US dollar currency pegs and large debts. Malaysia would be one – its banks are highly dependent on dollar funding⁹. As usual, investors seeking to add growth from emerging markets to their portfolios might do well to spread their risks. Fortunately, emerging markets are a heterogeneous mix, with commodity producers like Russia, Indonesia and South Africa included alongside the increasingly consumer oriented markets of China and India.
loganair: By Ian Cowie: Fidelity China Special Situations (FCSS), the £1.8 billion investment trust that ended Anthony Bolton’s career on a bit of a bum note but has since recovered strongly, delivered total returns of 26% during the last year. JP Morgan Chinese (JMC), a longer-established trust but a relative tiddler with assets of less than £270 million, shot the lights out with total returns of 39% over the same period. Cynics might say this is a flash in the pan but five-year returns from these investment trusts of 227% and 137% respectively suggest there is more to China than a mere financial fad. Sceptical souls might fear that by the time the media notice an emerging market it is always too late but, while both these trusts’ shares continue to trade around 12% discounts to their net asset values, there is room for further gains. Closed-end funds are the ideal way to get into this formerly closed-economy because their structure means long-term investors will not be forced to subsidise short-term speculators when they dash for cash, as will happen in highly volatile markets from time to time. By contrast, open-ended vehicles – such as unit trusts and exchange traded funds (ETFs) – may be forced to sell their most liquid and perhaps best underlying assets to meet redemptions. Never mind the technical details, though, what about the big picture? While the world has been looking in the other direction, mesmerised by Donald Trump’s antics in America, another president, Xi Jinping, has quietly consolidated political power and enabled economic progress on a scale rarely seen. Xi is said to see himself continuing the work done by Deng Xiaoping, who became leader in 1982 and introduced a ‘socialist market economy’ to repair the damage done by Mao Zedong’s communist policies that caused millions to starve to death. Little red book fan, John McDonnell, please take note. Now the International Monetary Fund and PriceWaterhouse Coopers are among those who predict China will overtake America as the world’s biggest economy within a decade. The collision of new technology and the same old authoritarian politics is accelerating the rate of change. With a repressive regime that routinely imprisons journalists and anyone else who criticises the government, China could never allow American internet giants free access to its population that comprises a quarter of all humanity. So home-grown rivals – such as Alibaba, Baidu and Tencent – were always guaranteed a clear run at the home market and have clearly taken up this opportunity to the full. This is a bit of a painful topic for me because I invested in what was then Fleming Chinese Investment Trust more than 20 years ago, after visiting Shenzhen and Shanghai. What followed was an exciting ride, with the share price doubling in the run-up to the handover of Hong Kong in 1997 but halving not long afterwards. Things picked up in the noughties, despite a painful spike lower in 2008, before a terrific bounce in 2009 when I took profits to pay for a classic sailing boat and sold the last of my direct interests in that country. Since then, with the benefit of hindsight, I can see that I have taken my eye off the ball. If only I had hung on to those red chips but am now thinking of investing there again. Fidelity’s trust looks marginally more attractive to me because, according to Edison Investment Research, it has shunned banks and property where a nasty surprise might be lurking in the ‘shadow economy’. Instead, Fidelity holds Hutchison China MediTech (HCM) - which has exciting prospects of a cure for some cancers - along with bigger stakes in Tencent and Alibaba. There is also a modest yield of 1.1%, which has risen by 20% over the last five years and is more than double the dividends paid by JP Morgan’s rival trust, where there has been no progress in payouts at all, according to Association of Investment Companies statistics. You don’t need to be a communist or be invited to the congress jamboree to see money-making opportunities in China.
loganair: China experiences more growing pains - By Graham Smith: The evolution of China’s stock markets continues and, it seems, it’s not always an easy path to tread. Over the past year, Chinese regulators have introduced a number of reforms to make stock markets more efficient. However, the one that became a significant factor earlier this week – the newly introduced “circuit breaker” – seems to have backfired. The idea of the circuit breaker is to halt trading in shares when prices fall past a certain point during a single trading day. That happened in China’s domestic stock markets in Shanghai and Shenzhen on Monday, following the release of a survey of business sentiment indicating that Chinese manufacturing contracted for a fifth successive month in December1. It happened again on Thursday, after China’s central bank fixed the value of the yuan about 0.5% lower against the US dollar and investors sold shares one day ahead of the planned expiry of a ban on major shareholders selling their stakes in listed companies2. There are a number of problems with circuit breakers. In markets that are naturally volatile especially, daily drop limits can get hit in the absence of any real change in the fundamentals. The suspension of trading can reinforce a pent-up demand among short-term investors to sell at the next possible opportunity. The essential problem is that interventions imposed by circuit breakers tend to delay rather than accelerate the natural path that markets would otherwise travel to find their “true level”. Similar difficulties arose during the global financial crisis, after regulators in the US and Europe introduced bans on short selling (the mechanism by which investors sell shares they do not own in the hope of buying them back at a lower price later). Domestic stock markets in Shanghai and Shenzhen, which soared during the first half of last year, partly in anticipation of foreign investors being allowed to invest in them, have proven vulnerable to swings in sentiment and bouts of selling ever since. A lack of liquidity in these markets this week caused a spill-over of selling into the more easily traded Hong Kong market too. From a fundamental perspective, it’s unlikely that anything much has changed in China since the end of last year. We know already that growth has been slowing for some time, largely because the government is encouraging a shift away from lower quality, debt-fuelled investment towards a services-orientated, consumer economy. This means better quality growth, but a bit less of it. How many of us will have noticed the labels on our goods changing from China to Vietnam over Christmas? That reflects an industry shift, as China outsources some of its traditional manufacturing to other parts of Asia and leverages what it has learnt from its global business customers (take Apple, for instance) to produce higher value-added goods and services. A survey of Chinese purchasing managers covering both manufacturing and services out on Wednesday showed an overall drop in business activity in December, but a widening gap between the two sectors. One important difference was that services companies continued to hire new staff last month while manufacturers shed jobs3. These trends are reflected in China’s retail sales, which continue to grow appreciably faster than the overall economy. Sales of consumer goods increased at an annual rate of 11% in November, with household appliances and AV equipment (+18%) furniture (+15%) and medicines (+16%) among the standout numbers4. It seems unlikely that China’s government will let overall growth slip too far. It has demonstrated already that it will not shy away from cutting interest rates and the amounts banks are required to hold in reserve in an effort to support growth. Further signs of economic weakness this year could bring more of the same5. It seems plausible too that the markets regulator will adapt the way in which circuit breakers work as, clearly, they are failing to operate as desired. Skilful, active fund managers pounce on market disconnects such as the one we have seen this week as opportunities and build their reputations on them. They are likely to be in a better position than most of us to identify the emergence of value in companies they know well and, depending on the availability of cash in their portfolios, they may act on that knowledge. Such flexibility during volatile periods presents opportunities that passive, indexed funds do not enjoy. That is as true in China as anywhere, as government initiatives to reshape the economy towards a more consumer-led entity, promises to widen the divide between winners and losers still further. China’s thriving information technology sector underlines this: Four Chinese firms – Alibaba, Baidu, Tencent and are among the world’s top-10 internet companies6. Unlike their western counterparts, such as Google and Amazon, they are ideally positioned and tailored culturally to capture growth in China’s burgeoning consumer market. At this point it seems worth mentioning that, following the stock market’s recent poor showing, Chinese equities look attractively valued overall, particularly when viewed against the higher valuations and lower prospective growth rates of western countries. Market moves in Shanghai and Shenzhen this week have bought domestic shares back close to their pre-bubble levels of just over a year ago7. Moreover, the MSCI China Index, which covers around 85% of China’s investable universe of shares, traded on less than 10 times the earnings of the companies it represents at the end of November8. While that belies substantially higher valuations among hot “new economy” stocks, it represents a sizable discount to world equities (trading on 19 times). Moreover, it suggests that, even before the market falls of this week, a good amount of pessimism about China’s future had been factored in. One can only conclude that the opening up of Chinese markets to private companies at a time when the demand for consumer goods, sustainable energy production, information technology, insurance services and better healthcare continues to expand, promises opportunities for investors prepared and able to take a longer term view.
loganair: Why China's problems are worse than investors think China's problems are worse than many people think, argues Fidelity's Dominic Rossi. China's slowing economic growth has proved the catalyst for the bulk of the stock market upheavals throughout 2015. Whether it is the rout in mining stocks which has reignited over recent days, the heavy stock market falls over the summer or the jitters prompted by the failure of the US to raise interest rates in September, China has played a large role in the uncertainty facing investors as they look ahead to 2016. Pause for thought: Dominic Rossi, chief investment officer at fund group Fidelity, argued that China's economic problems were worse than many investors thought, and should prompt a shift in broader expectations around emerging markets. China's economic growth has been faltering since its double-digit expansion before the financial crisis, with the recent third quarter figures putting its annual growth rate at 6.9%. And last month, China's premier Xi Jinping said the country needed to grow by more than 6.5% over the next five years to meet its targets. Those still bullish on China have argued that despite the slowing growth, the country is still the world's faster growing major economy, with even a 6.5% growth rate far outstripping growth seen in the developed world. Deflation threat: That is too simplistic a view, argued Rossi in a conference call with investors today. China faces a deflationary threat, he said, pointing to the producer prices index – a measure of the price of factory goods – which had fallen for 32 consecutive months. Consumer prices are still rising modestly, but experts fear the slump in factory prices will ultimately hurt headline inflation. Any deflation will weigh on economic growth, as does the fall in the yuan, down 3.5% against the dollar over the year after China's shock series of devaluations over the summer. Contrast that with the US, where the economy is expected to grow by 2.5% over the year, against a backdrop of core inflation – excluding food and energy prices – of 1.9%, and nominal economic growth, accounting for inflation, is twice as fast in the US in dollar terms as in China. 'The key event in 2015 is the emerging markets crisis we are now in,' said Rossi. 'The importance of this is it basically means the emerging world has joined the developed world in a very low nominal growth framework. Up until now we have been quite happy to think of emerging markets as having a much higher nominal growth rate.' Rossi believes that markets in 2016 will continue to be led by the US. He argued markets were still in the middle of a post-financial crisis cycle contrasting markedly with the dynamics of the market that prevailed in the five years leading up to the 2008 crash. The expansion of shares valuations by an increase in the multiples – or premium – investors are prepared to pay for growth stocks, rather than a rise in profits, have driven the post-financial crisis rally. This has been lead by developed markets, particularly the US, with investors prioritising intangible assets like intellectual property over hard assets like commodities, with income investments also in the ascendancy. Strong US: Rossi sees no signs of that changing next year. 'Throughout 2016, we remain very, very confident about the health of the US consumer and we think the health of the US consumer will work its way through the developed world,' he said. But returns for much of the market will be subdued by the already-high premium placed on income-producing assets, he said. 'We are living in a world where we have too much capital chasing too little income. We are effectively bringing forward future returns to today. The gap between present value of securities today and their future value has been narrowed. 'We are in an era of defiantly high asset prices. The returns by definition must be lower by historical standards.' He argued that technology and innovation, especially in the US, was where growth opportunities remained, despite its already strong run. 'The only way within equities to escape this environment is to focus on the theme of innovation. The innovation we are seeing in information technology, social media, gaming, healthcare, medtech and biotech. It's this leadership in innovation whic is mainly captured by the Nasdaq. That leadership is here to stay.'
loganair: China learning the free market ropes By Graham Smith: China’s brand of free market miracle for investors came to an abrupt halt earlier this month. Shares in Shanghai and Shenzhen have tumbled since June, giving up more than 20% of their value1. So what’s happened? These falls follow a year of ballooning share prices, encouraged by a confluence of factors. Easy access to credit to buy shares and falling property prices were two of the main ones. To top that, Connect, a programme joining the Hong Kong and mainland markets, got underway last November. The significance of the link was that it gave foreign investors the opportunity to invest in domestic shares via Hong Kong. Domestic retail investors envisaged a wall of overseas money heading eastwards. Once the bull had started charging, domestic individuals accentuated the trend, much of it with borrowed money. Since the market went into reverse, investors have rushed for the exit, raising cash to settle their debts. Beijing has announced a number of measures, including a cut in interest rates and a partial ban on short selling (that’s where investors use financial instruments to borrow then sell shares in the hope of returning them to the owner at a lower price, later). One of the problems is that China is freeing up its markets for the first time in a modern, highly interconnected world. That puts Chinese markets and the inexperienced domestic investors who have been trading them at the mercy of market forces. China’s free-market predecessors opened their markets in an age when dealing in shares was considerably more unwieldy. There are, perhaps, possible parallels to be drawn with the 1987 global markets crash, at least as it played out in Britain. The UK government’s privatisation programme of the day had introduced many to share ownership in the years leading up to the collapse. Some new investors had recycled their profits from companies like British Gas and Rolls Royce into other shares, some of them decidedly lacking in “blue chip” credentials. The intriguing thing was that, though the crash came as something of a shock and short-term investors lost money, sentiment recovered quickly. One of the surprising facts about 1987 is that the FTSE 100 Index ended the year higher than it had been at the end of 1986, despite encompassing a “crash” in October. It seemed as though, perhaps because the crash was over quickly, that millions of new investors had embarked on a path that was irreversible. That was then though. During the financial crisis of 2008, a ban on short selling was introduced in the US and elsewhere, supposedly to stop the rot in global markets. The reality was these bans did nothing of the sort for three reasons. First, would-be short sellers became pent-up sellers, who would go on to pressurise markets as soon as the bans were lifted. Secondly, they sapped the confidence of other investors, who knew they may be buying shares in a “false market” only to have any gains they might make in the short term wiped out later when the sellers returned. Finally, and most importantly, the ban did nothing to improve the inconvenient truth - that credit had dried up and the world economy was headed for a deep recession. In other words, the economic fundamentals were poor. So for China, two questions remain. Can the economy continue to grow at a fast enough pace to justify current share prices? And will China’s path to free markets continue despite current difficulties? This week we learnt that the economy grew at a 7% annual rate in the second quarter of this year, with retail sales increasing by 10.6% year on year in June. That’s a bit better than expected and suggests the economy is stabilising after a prolonged slowdown. The government will know that the liberalisation of China’s stock markets must continue. Healthy stock markets bolster the coffers of consumers – attractive for a government trying to reduce economic reliance on public spending and exports. Companies benefit too, from having an alternative source of financing other than bank loans, an important factor in China where there’s too much debt in the financial system. For long-term investors, the opportunities might seem to beckon. Just as in the bubble of the 1990s, smaller, less liquid shares have travelled the steepest paths up then down, while many larger, higher quality names have been less affected. Meanwhile, the government has all the firepower it might need to combat any additional stresses built up in the financial system. Notwithstanding caveats about market interventions, volatility is most likely to have created opportunities for those with patient strategies.
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