China Consumer Fund launched for investors

Fidelity International is tapping into rising consumerism in China with the launch of China Consumer Fund to take advantage of pro-consumption government policies and urbanisation.

Managed by Hong Kong based Raymond Ma, the fund aims to provide direct exposure to companies developing, manufacturing or selling goods and services in China.

It points out that the Chinese government continues to focus on boosting domestic consumption and reducing reliance on exports and at the recent Strategic and Economic Dialogue in the US, Chinese delegates issued a statement that said the world's second largest economy would seek to expand domestic demand and increase imports.

It says that the China Consumer Fund gives investors direct exposure to the companies set to benefit from China's consumption boom as it spreads from the top affluent groups to the middle class.

Ma will hold companies involved in the development, manufacture or sales of goods or services to Chinese people in a portfolio of typically 80 to 120 stocks listed in China, Hong Kong and Taiwan.
With more than 10 years experience researching companies in China, Ma believes the country is on the brink of a new phase of consumer development. Factors supporting this change include pro-consumption government policies, strong productivity and income growth, upgrades in the quality of consumption, and robust urbanisation.

‘China is now at the point that Japan reached in the late 1960s and Korea reached in the late 1980s. The last ten years in China have been a golden age of manufacturing and investment-led growth. The next ten will be an age of consumer led growth,’ Ma said.

‘Domestic consumer spending as a percentage of Gross Domestic Product should skyrocket over the next few decades and China's growing affluent middle class and increasingly urbanised provinces should propel a new set of opportunities as well as winners. The China Consumer Fund aims to build value from this fundamental thesis,’ he added.

Ma believes Chinese wages and domestic demand will continue to grow strongly over the next five to ten years, further stimulating this consumer boom. ‘In the latest Five Year Plan, the government has started to address income inequality by promoting wage growth so the national average wage could double over the next seven year,’ he said.

‘Children born out of the single child policy who have reached their 20s enriched by their parents' savings are now ready to spend. And with China's rising middle class ready and able to pay for a better quality of life, branded goods and luxury items could be especially popular. Many of these drivers are being captured by a new breed of Chinese small cap businesses that have grown into mid cap national champions over the past decade, and are set to become global leaders in the future,’ he explained.

Ma, who was born in China, has more than a decade of experience in the Chinese consumer sector. He describes his investment style as a Mosaic’ approach with about 70% of the stock picks coming from fundamental bottom up research, while around 10% comes from technical analysis, 10% from industry analysis and 10% from top down choices. The performance benchmark for the fund is the MSCI China Index NR.

The Fidelity Funds China Consumer Fund is available for investment in an ISA and there is no initial charge for investments made before 20 June. For investments made after that date, there is an initial charge of 3.5% or 0.5% for those who apply online. An annual management charge of 1.5% applies.