$UOBAM PING AN CHINEXT ETF(CXS.SI)$
Why Invest?
· Opportunities across multiple sectors: The UOBAM Ping An ChiNext ETF seeks a wide range of innovative growth companies that may stand to ride on the materialisation of the future megatrends. This includes Electric Vehicles (EVs), Clean Energy, Biotechnology, and Cloud Computing.
· Exposure to leading innovations: China leads in 5G/6G telecommunications and has a dominant global market share in EVs, EV supply chains (including batteries), renewable energy such as solar and wind, and Artificial Intelligence (AI) development.
· Pro-growth policy support: To reduce the dependence on foreign technology (tech), China is shifting its focus to hard tech[1]. China also pledged to scale up R&D investments, raising over 1,700 government guidance funds of nearly US$1 trillion[2] to support strategic industries.
· Cheap valuations: China’s equity market valuation may have bottomed in October 2022 according to its price-earnings ratio (PER) being more than one standard deviation below its mean. (February 2023 PER is one standard deviation below its mean).
One Month Portfolio Review
From its inception on 14 November 2022, the UOBAM Ping An ChiNext ETF[1] (the “Fund”) tracked the ChiNext index very closely with only very minor performance deviation that resulted from fees and initial deployment.
For the month of February 2023, the Fund fell 5.81 percent[2] (in SGD terms). Its benchmark index fell by 6.88 percent[3].
Historical Performance
Past performance is not necessarily indicative of future performance
Fund performance is calculated on a NAV to NAV basis.
Benchmark: ChiNext Index
Source: FactSet. Performance as at 28 February 2023, SGD basis, with dividends and distributions reinvested, if any.
Performance (Class SGD Acc)
Source: Morningstar. Performance as at 28 February 2023, SGD basis, with dividends and distributions reinvested, if any. Performance figures for 1 month till 1 year show the percent change. Benchmark: ChiNext Index. Past performance is not necessarily indicative of future performance. ^Includes the effect of the current subscription fee that is charged, which an investor might or might not pay.
Top 5 performers:
Source: Wind Information, Ping An Fund Management. Performance as at 28 February 2023, Chinese yuan basis.
Zhonghang Electronic Measuring Instruments Co Limited (Zhonghang Electronic) was the best performer within ChiNext Index with a 395.09 percent gain in February 2023. The strong rally was fueled by the company’s announcement to acquire 100 percent of AVIC Chengfei Commercial Aircraft Company Limited's (AVIC Chengfei) equity. As an aircraft engine manufacturer with strategic value in the supply chain, the acquisition of AVIC Chengfei is believed to enhance Zhonghang Electronic’s competitive advantage and improve profitability.
Bottom 5 performers:
Source: Wind Information, Ping An Fund Management. Performance as at 28 February 2023, Chinese yuan basis.
On the flip side, NanJing AoLian AE&EA Co Limited was the biggest laggard with 35.59 percent decline in February 2023 as the company was suspected of violating laws and regulations in information disclosure and is currently under investigation by the China Securities Regulatory Commission.
Market Review
In terms of the industry performance, Real Estate is the top return contributor followed by Communication Services and Consumer Discretionary. On the flip side, Industrial, Healthcare, and Financials underperformed.
Global equity markets were volatile in February 2023 with more declines seen than gains. The Shanghai Composite Index fluctuated in February 2023 and ended with a small gain while other broad-based A-Share indices generally saw declines, especially the ChiNext index. In terms of industries, communications (+8.59 percent), light industry (+6.68 percent), and computer (+5.69 percent) saw positive returns while power equipment (-6.02 percent), banks (-3.80 percent) and nonferrous metals (-3.58 percent) underperformed.
Economic recovery is taking shape after the COVID-19 infection rate peaked in China. Both manufacturing and services Purchasing Managers’ Index (PMI) continue to improve in February 2023, highlighting supply and demand recovery across sectors. In addition, new loans rose by 17.3 percent in January 2023 while the average new home price for 70 medium and large cities did not decline in January 2023 for the first time since August 2021, signaling that growth recovery is on track. Meanwhile, 2023 economic targets released in the National People’s Congress (NPC) annual Government Work Report (GWR) further anchored market expectations. To highlight the key takeaways from the 2023 GWR, the Gross Domestic Product (GDP) growth for 2023 is expected to be +5 percent, the Consumer Price Index (CPI) is to be maintained at about 3 percent, the unemployment rate is to be below 5.5 percent, creating 12-million of new urban jobs and scaling up special local government debt quota to 3.8 trillion yuan.
Monetary policy is likely to remain accommodative in 2023. The Central Economic Work Conference (the annual meeting where the top leadership of the Chinese Communist Party sets the economic policy agenda for the next year) in December 2022 extended the theme of "target and focused monetary policy" and "maintaining reasonable and sufficient liquidity" from 2022. In addition, support for small and micro enterprises, technology innovation, and green development were highlighted. Meanwhile, in the fourth quarter of the 2022 monetary policy report released by the People's Bank of China (PBOC), it continued the theme from the Central Economic Work Conference to “focus on domestic demand expansion and provide more support to the real economy”. Concerns over inflationary pressure appear to have eased and monetary policy is likely to stay loose.
Outlook and Positioning
We remain positive about the fundamentals and the outlook of China ‘A’ shares.
Firstly, China’s economy is likely to recover gradually post-zero-COVID-19 era. Nevertheless, there are some uncertainties regarding the strength of the recovery, as it would depend on the extent of economic stimulus from the government and the evolution of the COVID-19 situation.
Secondly, government policies would likely favour equity markets. We believe monetary policy to remain accommodative to encourage economic recovery and further fiscal stimulus to support stable economic growth.
Thirdly, the market experienced a significant decline in 2022 and broad-based indices are still hovering near low levels, hence we see a smaller probability of an extended decline in 2023. If economic recovery is mild in 2023, the full-year return is unlikely to be exceptionally high.
Finally, geopolitical risk between US and China is a concern to the market and we remain cautious about any further development on this front.
[1] Hard tech refers to tech that requires continuous research and development (R&D) and advanced scientific and technological capabilities. It includes sectors such as semiconductors, new energy vehicles, renewable energy generation and healthcare.
[2] American Affairs, “Guiding Finance: China’s Strategy for Funding Advanced Manufacturing”, May 2022
[1] Exchange Traded Fund
[2] Source: Factset. Performance from 31 January 2023 to 28 February 2023 in SGD terms, on a Net Asset Value (“NAV”) basis, with dividends and distributions reinvested (if any).
[3] FactSet, 28 February 2023
Important Notice and Disclaimers
This document is for general information only. It does not constitute an offer or solicitation to deal in units (“Units”) in the UOBAM Ping An ChiNext ETF (the “Fund”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. The information contained in this document, including any data, projections and underlying assumptions, are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and the views of UOB Asset Management Ltd (“UOBAM”) as of the date of this document, all of which are subject to change at any time without notice. In preparing this document, UOBAM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by UOBAM. While the information provided herein is believed to be reliable, UOBAM makes no representation or warranty whether express or implied, and accepts no responsibility or liability for its completeness or accuracy. Nothing in this document shall, under any circumstances constitute a continuing representation or give rise to any implication that there has not been or there will not be any change affecting the Fund. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOBAM and any past performance or prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas Bank Limited (“UOB”), UOBAM, or any of their subsidiary, associate or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments and you should be aware of the risks associated with investments in financial derivative instruments which are described in the Fund’s prospectus. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund. Investors should note that the Fund is not like a conventional unit trust in that an investor cannot redeem his Units directly with UOBAM and can only do so through the participating dealers, either directly or through a stockbroker if his redemption amount satisfies a prescribed minimum that will be comparatively larger than that required for redemptions of units in a conventional unit trust. The list of participating dealers can be found at www.uobam.com.sg.
An investor may therefore only be able to realise the value of his Units by selling the Units on the Singapore Exchange Limited (“SGX”). Investors should also note that any listing and quotation of Units on the SGX does not guarantee a liquid market for the Units. An investment in unit trusts is subject to
investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before deciding whether to subscribe for or purchase any Units. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you. The Fund is not in any way sponsored, endorsed, sold or promoted by and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the ChiNext Index (the “Index”) and/or the figure at which the Index stands at any particular time on any particular day or otherwise, The Index is administered, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Fund and the Index and shall not be under any obligation to advise any person of any error therein. “SGX” is a trademark of SGX and is used by the Index under license. All intellectual property rights in the Index vest in SGX. Please note that, where relevant, the general disclaimers and jurisdiction specific disclaimers found on SGX’s website at http://www.sgx.com/terms-use are also incorporated into and applicable to this document/material.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
UOB Asset Management Ltd Co. Reg. No. 198600120Z
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