Manulife fund offers access to China stocks

Fund management firm Manulife Asset Management and Trust Corp. (MAMTC) has rolled out a new fund that gives local investors access to a portfolio of companies listed on Hong Kong and mainland China.

Made available to local investors for a minimum of P5,000 or $100, the new unit investment trust fund (UITF) called Dragon Growth Equity Feeder Fund is described as a fund that adopts “flexible and dynamic” allocations between China and Hong Kong equities according to changes in market conditions, government policies, industry trends and individual holdings.

The new fund “enables investors to take advantage of China’s transformative growth story and access its impressive domestically driven economy,” said Aira Gaspar, president and chief executive officer of MAMTC.

“We are really positive about the prospects of this particular strategy given that China is the second largest economy in the world and we’re seeing that China has been transformed into a more domestically oriented economy so somehow it reduces its vulnerability to external headwinds,” she said in a press briefing on Wednesday.

China, erstwhile an investment-driven economy, restructured its economy over the years to become more consumption-driven, capitalizing on its vast population and growing consumer affluence.

Gaspar said this had brought up the share of consumption to Chinese gross domestic product (GDP) to 78.5 percent from 64 percent in 2017.

“These, I think, are very good developments that can provide favorable outlook to China equities for Philippine investors,” she said.

Although less than 1 percent of the Philippine population invest in equities, Gaspar said Manulife’s client base comprises investors who typically have a large allocation for equities, suggesting that these people may consider diversifying to new markets like China.

“The Chinese government has subsequently embarked on a series of reforms that are designed to push the economy further up the value-added chain over the past years.  We expect the Chinese government will continue to implement fiscal policies to support economic growth and provide backing for private enterprises,” said Kai Kong Chay, managing director and lead portfolio manager of China/Hong Kong equities at Manulife Asset Management.

In a briefing, Chay said valuation of equities in China was back to levels in 2015, making them very attractive.  The Dragon fund is distributed across various sectors but is mostly focused on the financial sector because there are many Chinese state-owned enterprises that were included in various global indices.

A big part of the fund is devoted to financial and communication businesses but it also scouts for opportunities in sectors that large global funds do not typically pay attention to, like health care and retailing in China.  These sectors are where valuations are more attractive, and where Manulife strategists could help “identify gems,” Chay said.