BY KIM LEE, SENIOR FUND MANAGER
Although concerns continued around the actions of Kim Jong-un in North Korea, which included a missile being flown over Japan, equity markets largely shrugged these off. Instead, the focus was on ensuring ongoing stability in China, particularly given how close we are to the 19th Party Congress. China’s September Purchasing Manager’s Index (PMI) number came in better-than-expected, which was supportive for the market, although the Caixin PMI – which has a more small and medium-sized enterprise (SME) focus – showed some weakness.
There was also some government activity, with the People’s Bank of China cutting the reserve ratio requirement (RRR), but only for those banks that lend more to the SME sector, instead of the larger state-owned enterprises (SOEs). This comes into effect on 1 January 2018 and will hopefully enable parts of the market to rebalance and ensure credit is lent more effectively, whilst also ensuring the aforementioned stability. In addition, there was some further tightening in the Tier 2 and 3 property sector, as the government banned any re-sale of a pre-sale property within the first two years. This was enacted to curb speculation. Nonetheless, we do not expect the property market to be particularly hampered given that only a small proportion is bought and sold for investment purposes, plus finished inventories are also at record lows.
In terms of portfolio activity, we did sell some property companies that had performed extremely strongly year-to-date, and also took advantage of price strength to exit some positions in Australian commodities stocks. Instead, we took part in two initial public offerings (IPOs) – one in education and one in fintech – in China, as well as buying some consumer discretionary and consumer staples names. Having lagged the broader market year-to-date, we now feel that they are well-placed to outperform.
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Currency fluctuations can also affect performance. Due to the underlying assets held, the price of the Fund is classed as having above average to high volatility.
The information contained in this document is provided for use by investment professionals and is not for onward distribution to, or to be relied upon by, retail investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice. This document is issued for information only by Canada Life Investments. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at www.canadalifeinvestments.com.
Canada Life Investments is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
CLI00951 Expiry on 15 January 2018