After a prolonged stretch of lacklustre performance in the Chinese (CSI 300 Index) and Hong Kong (Hang Seng Index) stock markets spanning three to four years, there was a significant turnaround observed in February 2024. This reversal has resulted in year-to-date gains of 5.1% for the CSI 300 Index and 4.2% for the HSI Index. The rally has continued into early May, signaling a notable upward trend.
Over the past year, the Chinese government has implemented a range of initiatives aimed at boosting confidence in the economy. These efforts have included policies designed to stimulate home purchasing by gradually relaxing restrictions on property purchases. During the Politburo meeting held on April 30th, China’s top party leaders emphasized the importance of examining strategies to digest housing stockpile and control new supply.
And fresh from the oven this week, Hangzhou is removing all restrictions on home purchases to revive the local housing market, which marks the most aggressive measure by a municipal government following an apparent green-light from the nation’s top leadership last month. The changes will also allow non-local homeowners in Hangzhou to apply for a local residency permit while developers will get a free hand in selling units in projects that are undersubscribed, instead of following a lottery-based system to clear them. Why is this important? Hangzhou is the capital of eastern Zhejiang province and a major technology hub in China, and home to e-commerce leader Alibaba Group Holding and carmaker Geely. Following the lifting of home purchase restrictions (HPRs) in Hangzhou, only seven core cities (Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Xi’an, and Haikou) keep their HPRs so far, although these cities aforementioned have relaxed their restrictions since last year. We believe more easing will come and property sales is expected to recover MoM in May.
In our early piece, we highlighted that many investors are still focusing on the property sector but neglect its rapidly growing digital economy, including areas such as Artificial Intelligence (AI), Electric Vehicles (EV), Renewables, Data Mining, Machine Learning, Cloud Computing, etc., which accounted for 41.5% of China GDP in 2022, according to China Academy of Information and Communications Technology. US restrictions on advanced chips critical to the development of AI tech as well as cutting-edge weapons also forced China tech giants to be self-sufficient in this area. On a separate note, according to our channel checks, the contribution of the property sector to GDP has now declined to the mid-single digits. We believe the new growth areas aforementioned have the potential to expand further in China, transforming the economic structure over the longer term.
Stability has increased in the Chinese stock market as the securities regulator emphasises investor-centric capital markets. In addition to that, the state asset regulator focuses on enhancing returns for investors, incorporating market value into the SOE appraisal system, encouraging share buybacks and increasing dividends. It was also reported that China’s state-backed funds injected USD57 bn (CNY410 bn) into Chinese stocks this year to support the market. Finally, last month, China Securities Regulatory Commission unveiled a series of market reforms aimed at enhancing Hong Kong’s status as a financial hub by relaxing criteria of eligible ETFs, adding RMB Counters and including qualified REITs on Stock Connect. This measure is expected to widen the investor base, encourage incremental fund inflow to the Hong Kong stock market, and further enhance stock liquidity.
Valuation-wise, CSI 300 Index is attractive, trading at 11.61x 2024 P/E, 0.5 standard deviation below its 5-year mean. HSI Index is also attractive, trading at 8.65x 2024 P/E, one standard deviation below its 5-year mean (see attachment).
Our offerings: Phillip Managed Account for Retirement (PMART) and Phillip Managed Account (PMA) Unit Trust Mandates
Phillip Capital Malaysia offers a wide range of investment portfolios designed to meet your unique investment preferences and financial goals. Our investment offerings include Unit Trust Mandates that cater to investors who are interested in investing in both domestic equities and fixed income securities, as well as regional markets including China.
One of our offerings, the PMART UT, is a portfolio of approved provident unit trust funds managed by award-winning fund managers. It allows investors to invest in multiple unit trust funds through a single investment and is reviewed and adjusted quarterly or as needed in response to major events. Separately, PMA UT is ideal for cash investors seeking a tailored investment solution via investment in multiple unit trust funds through a single investment. In addition to that, we also launched PMART UT Flexi in Feb 2023 which allows investors to invest in a portfolio of top performing unit trust funds which may or may not be approved provident unit trust funds.
We offer both conventional and Shariah-compliant options to accommodate the preferences of all investors. We also offer both Conservative and Aggressive mandates that cater to different investors’ level of risk appetite. Our country allocation for PMART UT, PMA UT and PMART UT Flexi for the month of April 2024 is as follows. We currently like Asia equities, including Korea & Taiwan (tech recovery), India (stellar domestic demand), HK/China (valuation), Malaysia (political stability) as well as developed market equities, notably those in the United States (strong earnings quality).
- PMART UT Conventional
PMART UT | Conservative | Aggressive |
US | 2% | 3% |
Euro | 0% | 0% |
China/HK | 16% | 22% |
India | 3% | 4% |
Japan | 1% | 1% |
Malaysia | 29% | 25% |
Rest of the world | 20% | 24% |
Bond | 16% | 8% |
Cash | 13% | 14% |
Total | 100% | 100% |
- PMART UT Shariah
PMART UT | Conservative | Aggressive |
US | 2% | 3% |
Euro | 3% | 3% |
China/HK | 7% | 12% |
India | 6% | 7% |
Japan | 1% | 1% |
Malaysia | 29% | 27% |
Rest of the world | 22% | 24% |
Bond | 15% | 8% |
Cash | 15% | 15% |
Total | 100% | 100% |
- PMA UT Conventional
Managed UT | Conservative | Aggressive |
US | 19% | 18% |
Euro | 4% | 4% |
China/HK | 15% | 26% |
India | 3% | 3% |
Japan | 1% | 1% |
Malaysia | 18% | 15% |
Rest of the world | 11% | 12% |
Bond | 18% | 11% |
Cash | 10% | 11% |
Total | 100% | 100% |
- PMA UT Shariah
Managed UT | Conservative | Aggressive |
US | 17% | 20% |
Euro | 6% | 6% |
China/HK | 16% | 20% |
India | 5% | 5% |
Japan | 1% | 1% |
Malaysia | 9% | 6% |
Rest of the world | 16% | 19% |
Bond | 16% | 9% |
Cash | 14% | 13% |
Total | 100.0% | 100.0% |
- PMART UT Flexi Conventional
PMART UT Flexi | Conservative | Aggressive |
US | 5% | 17% |
Euro | 3% | 1% |
China/HK | 0% | 3% |
India | 0% | 2% |
Japan | 2% | 1% |
Malaysia | 38% | 39% |
Rest of the world | 0% | 7% |
Bond | 43% | 5% |
Cash | 9% | 25% |
Total | 100% | 100% |
- PMART UT Flexi Shariah
PMART UT Flexi | Conservative | Aggressive |
US | 5% | 15% |
Euro | 3% | 4% |
China/HK | 2% | 0% |
India | 0% | 4% |
Japan | 0% | 1% |
Malaysia | 44% | 38% |
Rest of the world | 4% | 6% |
Bond | 28% | 5% |
Cash | 13% | 26% |
Total | 100.0% | 100.0% |
We also offer Phillip Focus China Fund, Phillip Asiapac Income Fund and Phillip Global Stars Fund that offer investors exposure to HK/China market. Please click on the link to learn more or email us at cse.my@phillipcapital.com.my if you require any further information.
Disclaimer:
The information contained herein does not constitute an offer, invitation or solicitation to invest in Phillip Capital Management Sdn Bhd (“PCM”). This article has been reviewed and endorsed by the Executive Director (ED) of PCM. This article has not been reviewed by The Securities Commission Malaysia (SC). No part of this document may be circulated or reproduced without prior permission of PCM. This is not a collective investment scheme / unit trust fund. Any investment product or service offered by PCM is not obligations of, deposits in or guaranteed by PCM. Past performance is not necessarily indicative of future returns. Investments are subject to investment risks, including the possible loss of the principal amount invested. Investors should note that the value of the investment may rise as well as decline. If investors are in any doubt about any feature or nature of the investment, they should consult PCM to obtain further information including on the fees and charges involved before investing or seek other professional advice for their specific investment needs or financial situations. Whilst we have taken all reasonable care to ensure that the information contained in this publication is accurate, it does not guarantee the accuracy or completeness of this publication. Any information, opinion and views contained herein are subject to change without notice. We have not given any consideration to and have not made any investigation on your investment objectives, financial situation or your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any persons acting on such information and advice.