$UOBAM PING AN CHINEXT ETF(CXS.SI)$
Why Invest?
Opportunities across multiple sectors: The Fund seeks a wide range of innovative growth companies and sectors that may stand to ride on the materialisation of the megatrends of the future. This includes Electric Vehicles (EV), Clean Energy, Biotechnology and Cloud Computing.
Exposure to leading innovations: China leads in 5G/6G telecommunications and has a dominant global market share in EV, EV supply chain (including batteries), and renewable energy such as solar and wind, and Artificial Intelligence (AI) development.
Pro-growth policy support: To reduce its reliance on foreign technologies, China is developing its own technology capabilities and is shifting its focus from consumer-focused tech to hard tech[1]. China has 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. (Jan 2023 PER is at one standard deviation below its mean).
One Month Portfolio Review
From its inception on 14 November 2022, the UOBAM Ping An ChiNext ETF[3] (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 January 2023, the Fund rose 10.22 percent[4] (in SGD terms). Its benchmark index rose by 10.88 percent[5].
Historical Performance
Performance (Class SGD Acc)
Source: Morningstar. Performance as at 31 January 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.
Market Review
In terms of industry, all industries were in gains for January with Industrials being the top return contributor followed by Healthcare and Information Technology.
In January, the A-share market benefited from an improvement in risk appetite, with most major indices recording gains. The GEM Index rose 10.0% as the best performer, followed by the Shanghai and Shenzhen 300 Index, which was up 7.4%, and the Shanghai Composite Index gained 5.4%. From sector perspective, most sectors made profit, with the following as leaders: nonferrous metal industry (27.80%), computer industry (12.80%), electric equipment industry (11.82%), automobile industry (10.89%), and mechanical equipment industry (9.72%). On detractors, only trade and retail industry (-1.18%) and social services industry (-0.30%) had small declines. The sectors with relatively small gains include general industry (0.09%), beauty care industry (0.81%) and transportation industry (1.97%).
Economic recovery is observed as the Chinese economy regained vitality with the peaking of infection rate. In January 2023, both the manufacturing PMI and the services PMI returned to expansionary territory with prints of 50.1 and 54.4 respectively. Meanwhile, passenger count, movie box office and tourist arrivals during the Spring festive season have all recovered substantially, which pointed to an accelerated pace of consumption recovery. In addition, high-frequency data that track economic activities such as the Baidu Migration Index, also strengthened significantly.
Monetary policy is expected to remain accommodative. The Economic Work Conference extended the theme of "targeted and focused monetary policy" and "maintaining reasonable and sufficient liquidity" from previous years. In addition, support for small and micro enterprises, innovative technology firms and green development was highlighted. The People’s Bank of China (PBOC) stated post-conference that the degree of monetary policy support should be at least on par with last year and will be strengthened if necessary. Unless economic growth and inflationary pressure exceeded expectations, liquidity condition should remain accommodative.
Outlook and Positioning
We remain optimistic about the fundamentals and prospects of ‘A’ shares[6].
Firstly, the economy is expected to recover gradually with the easing of epidemic prevention and control measures. Nevertheless, there are some elements of uncertainty regarding the strength of recovery, as it would depend on the amount of economic stimulus provided and the evolution of epidemic situation.
Secondly, government policies may likely favour equity markets. We expect monetary policy to remain accommodative to encourage economic recovery and further fiscal stimulus to support stable economic growth.
Thirdly, market experienced significant decline in 2022 and broad-based indices are still hovering near low levels, hence we see smaller probability of extended decline in this year. We believe economic recovery is mild in 2023, full year return is unlikely to be exceptionally high.
Finally, geopolitical risk between US and China is a concern to the market and we will remain cautious on any development on this front.
Globally, inflationary pressure caused by the Russia/Ukraine conflict may have peaked, and we see limited room for US bond yields to rise. Domestically, liquidity condition remains accommodative. Although the economy is still under pressure in the short term due to impacts from rising infection cases, market-friendly adjustments to the epidemic prevention policies may see acceleration of economic recovery in 2023. Therefore, we are not pessimistic about the market in the medium-term.
[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
[3] Exchange Traded Fund
[4] Source: Factset. Performance from 31 December 2022 to 31 January 2023 in SGD terms, on a Net Asset Value (“NAV”) basis, with dividends and distributions reinvested (if any).
[5] Source: Factset: Performance from 31 December 2022 to 31 January 2023 in SGD terms
[6] China ‘A’ shares are the stock shares of mainland China-based companies that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). The shares are quoted in Renminbi (RMB).
All statistics quoted in the write-up are sourced from Factset as of 31 January 2023 unless otherwise stated
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.
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UOB Asset Management Ltd Co. Reg. No. 198600120Z
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