Robeco logo

Disclaimer

1. General
Please read this information carefully.

This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 2 (dealing in futures contracts); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:

  • Some Funds are subject to investment, market, equities, liquidity, counterparty, securities lending and foreign currency risk and risk associated with investments in small and/or mid-capped companies.

  • Some Funds are subject to the risks of investing in emerging markets which include political, economic, legal, regulatory, market, settlement, execution, counterparty and currency risks.

  • Some Funds may invest in China A shares directly through the Qualified Foreign Institutional Investor (“QFII”) scheme and / or RMB Qualified Foreign Institutional Investor (“RQFII”) scheme and / or Stock Connect programmes which may entail additional clearing and settlement, regulatory, operational, counterparty and liquidity risk.

  • For distributing share classes, some Funds may pay out dividend distributions out of capital. Where distributions are paid out of capital, this amounts to a return or withdrawal of part of your original investment or capital gains attributable to that and may result in an immediate decrease in the net asset value of shares.

  • Some Funds’ investments maybe concentrated in one region / one country / one sector / around one theme and therefore the value of the Fund may be more volatile and may be subject to concentration risk.

  • The risk exists that the quantitative techniques used by some Funds may not work and the Funds’ value may be adversely affected.

  • In addition to investment, market, liquidity, counterparty, securities lending, (reverse) repurchase agreements and foreign currency risk, some Funds are subject to risk associated with fixed income investments like credit risk, interest rate risk, convertible bonds risk, ABS risk and the risk of investments in non-investment grade or unrated securities and the risk of investments made in non-investment grade sovereign securities.

  • Some Funds can use derivatives extensively. Robeco Global Consumer Trends Equities can use derivatives for hedging and efficient portfolio management. Derivatives exposure may involve higher counterparty, liquidity and valuation risks. In adverse situations, the Funds may suffer significant losses (even a total loss of the Funds’ assets) from its derivative usage.

  • Robeco European High Yield Bonds is subject to Eurozone risk.

  • Investors may suffer substantial losses of their investments in the Funds. Investor should not invest in the Funds solely based on the information provided in this document and should read the offering documents (including potential risks involved) for details.

3. Local legal and sales restrictions
The Website is to be accessed by “professional investors” only (as defined in the Securities and Futures Ordinance (Cap.571) and/or the Securities and Futures (Professional Investors) Rules (Cap.571D) under the laws of Hong Kong). The Website is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of the Website is prohibited. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this Website. Persons accessing the Website need to be aware that they are responsible themselves for the compliance with all local rules and regulations. By accessing this Website and any of its pages, you acknowledge your agreement with understanding of the following terms of use and legal information. If you do not agree to the terms and conditions below, do not access this Website or any pages thereof.

The information contained in the Website is being provided for information purposes.

Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.

4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.

5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.

Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.

6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.

7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.

Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.

Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.

8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.

9. Privacy
Robeco guarantees that the data of persons accessing the Website will be treated confidentially in accordance with prevailing data protection regulations. Such data will not be made available to third parties without the approval of the persons accessing the Website, unless Robeco is legally obliged to do so. Please find more details in our Privacy and Cookie Policy.

10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.

Please click the “I agree” button if you have read and understood this page and agree to the Disclaimers above and the collection and use of your personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy and Cookie Policy, including for the purpose of direct marketing of Robeco products or services. Otherwise, please click “I Disagree” to leave the website.

I Disagree

01-05-2023 · Insight

Positive China data validates recovery, despite trade tensions

Geopolitical and related trade tensions with the US are overhanging investor sentiment towards China, but the data flow is turning firmly positive.

    Authors

  • Jie Lu - Head of Investments China

    Jie Lu

    Head of Investments China

  • Helen Keung - Client Portfolio Manager

    Helen Keung

    Client Portfolio Manager

Summary

  1. Drumbeat of positive economic data being obscured by trade tensions with the US

  2. Q1 GDP growth strong and the property market has finally showed signs of bottoming-out

  3. Domestic travel-related consumption returning to pre-Covid levels

The data is unambiguous

It’s hard to believe it’s only six months since China first clearly indicated it was set to reverse course and re-open the economy after Covid. Despite the worst fears of some analysts the re-opening has gone relatively smoothly and the economy is now gathering momentum.

There are still skeptics out there but the recent economic data has been positive. Q1 GDP growth was recorded at 4.5% year on year and places the second largest economy in the world comfortably on track to reach the stated official goal of 5% growth for 2023 without any further easing of monetary policy or additional fiscal stimulus. The underlying data was uneven with retail sales and fixed asset investment growing strongly but industrial production only up a tepid 3.9% year on year. That was blamed on weak demand from Europe and the US, which was also reflected in export figures for March with strong growth in exports to ASEAN countries (+18.8% year on year) offsetting weakness to Europe (down 7%) and the US (down 17%).

Other indicators show growth is likely to gather momentum in Q2 and beyond. China's March Manufacturing PMI reached 51.6 and non-manufacturing surged to 55.0; both continuing to expand and coming in stronger than consensus. In addition, March power usage increased by 5.9% year on year to 736.9 billion kilowatt-hours, accelerating markedly from January and February growth rates.

From our perspective it’s weak growth in Europe and the US that’s reflected in this data, with China (domestically) and ASEAN outperforming. This confirms our view that China’s economy is on track for solid if unspectacular growth and that explains recent equity market strength that has seen the Shanghai Composite rise 8.7% in the year to 16 April 2023.

Property market is finally past its nadir

Residential property sales increased 7.1% year on year in Q1 compared to 3.5% in Q4 2022, indicating a sales recovery is finally gaining traction and the market is functioning again. The sales data is also reflected in prices, which eked out a 0.5% month on month gain in March 2023, supporting our thesis that the bottom is in.

This doesn’t mean anything immediate in terms of overall construction activity as the sales growth is accounted for by unsold inventory, but it’s a clear first indicator of normalization. We also monitor land acquisition data in major cities which is showing signs of increasing demand. Though there is usually a lag between land acquisition and construction, it will still lead to an improved construction demand from the property sector. This in turn will have important implications for business and consumer confidence going forward.

Absolutely flying

As in the rest of the world, travel has been at the leading edge of recovery after the Covid constraints were released, closely followed by luxury consumption. In China the two often coincide and the indications ahead of the golden week holiday (in the first week of May) suggest the trend will continue.

Macao hotel rates will surpass pre-Covid levels, while occupancy rates based on pre-bookings will be higher than in 2019.

This is good news for listed casino companies which are enjoying earnings revisions but the glow of recovery is also being felt across the whole domestic travel sector. China’s online travel agent Trip.com told us domestic hotel room nights and air ticketing volume are tracking at low-teen growth vs. 2019 levels, a very positive indicator.

As a result we have positioned in travel-related companies and mass consumption goods including brewery businesses to ride this strong trend in leisure-related consumption.

Get the latest insights

Subscribe to our newsletter for investment updates and expert analysis.

Don’t miss out

Trade tensions smoulder, but it isn’t a trade war

The most obvious overhang in terms of investor sentiment towards China is the current friction over trade. This is real in the semiconductor space, where the US CHIPS Act and restrictions on export of chipmaking technologies to China announced in October 2022 are already having a material impact on operations and planning. China’s retaliation has so far been limited – consisting of launching a cybersecurity investigation into US memory chip giant Micron Technologies, and there hasn’t yet been a spillover to other sectors.

In our view, outside the semiconductor sector, the trade issue is currently being exaggerated in terms of its tangible effect, and we hope there isn’t any escalation, as the economic impact would be severe on both sides of the Pacific.

Offshoring: A long-term trend

The movement of manufacturing to ASEAN nations and India has also been framed as a negative for China which, ceteris paribus, it is. However, we believe this is a long-term process and more related to China’s manufacturing competitiveness vis-à-vis Vietnam and the other destinations. China’s tilt towards quality of growth while moving up the value chain, and a rise in wage levels is the structural underpinning of this trend, rather than geopolitics.

The offshoring trend was given a further boost by the Covid pandemic when the benefits of having a distributed supply chain with some redundancy built-in became obvious. This is a clear benefit to China’s neighbours, but it does not spell the end of China’s economic development, and is comparable to the gradual offshoring of US manufacturing to Mexico and China which happened over decades.

More positives than negatives

The trade tension and geopolitical worries are here to stay, but this new normal could settle into an uneasy equilibrium, rather than worsen. China needs foreign investors as Chinese authorities made clear at the China Development Forum in Beijing in March, a conference attended by numerous multinational CEOs including Apple’s Tim Cook. "Investing in China is investing in the future," said Zheng Shanjie, head of the National Development and Reform Commission at the conference. 1

It will take a lot to convince wary global investors to be that bullish, but in our view the positive drumbeat of economic data should underpin investor confidence in China. The recovery is real and it’s accelerating, with China likely to account for 30% of global growth this year, according to the IMF.

Given such a macroeconomic environment, we have positioned for a consumption revival while continuing to favor long-term themes where we believe value lies, including the green economy, technology innovation, and the technological upgrade of China’s industrial base. China’s equity market is trading at attractive valuations below its historical level, and earning revisions could be a driver going forward.

Footnote

1Key takeaways from China Development Forum 2023 – Xinhua – March 29 2023

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong. This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions. The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.