Why China, why now?

Aberdeen Investment Trusts
-
1
Why China, why now?

China’s equity markets have grown into the second largest financial market in the world, after the US. This is a US$17 trillion market that is both deep and liquid. There are more than 5,000 Chinese companies listed onshore in mainland China and offshore, mostly in Hong Kong and the US, presenting vast opportunity.

Chinese markets are also becoming large and growing components of major global indices. For instance, Chinese equities now make up 33% of the MSCI Emerging Markets Index. If China A Shares (the shares of mainland China-based companies that trade on the two Chinese stock exchanges) were included fully (from the current 20%), this would push the overall weighting of Chinese equities to 53%.

A big driver of growth has been the Stock Connect programme, which was launched in 2014. This opened direct trading links connecting Shanghai and Shenzhen with Hong Kong, making A Shares more accessible to institutional investors outside the mainland. These days, any investor with a brokerage account in Hong Kong can invest in over 2,000 companies listed in Shenzhen and Shanghai. Two-way investor flows between mainland China and Hong Kong have flourished as a result.

Another draw is the low correlation of Chinese equities and other asset classes. In other words, A Shares provide a great opportunity to diversify portfolio risk and potentially enhance returns.

Investing in both the onshore and offshore markets offers an extensive range of opportunities across these markets. With the onshore market, investors gain greater exposure to unique sectors such as baijiu (a popular liquor), as well as the faster growing new economy ones like electric vehicles and batteries, specialist technology and niche industrial areas. As for the offshore market, investors gain more access to internet and e-commerce companies, along with investment opportunities in telecoms.

More broadly, China’s financial reforms continue to improve the accessibility and liquidity of the domestic market. With more international investors’ participation in the A-share market, it could shine a light on global best practice and help to raise governance standards of local companies over time.

Why now?

abrdn sees tremendous opportunity in China, and the portfolio is well positioned to capitalise on key areas of structural growth.

  • Aspiration: As incomes increase and living standards improve in China, rising affluence is leading to fast growth in premium, or higher value, goods and services in areas including cosmetics, travel and food and beverage. The consumer story is attractive because boosting domestic spending forms a central component of China’s reform agenda.
  • Digital: Growing integration amid the widespread adoption of technology means a bright future for plays on e-commerce, cybersecurity and data centres supporting cloud services.
  • Green: Policy makers globally are committing to a greener and lower carbon world and China is expected to have a transformational role to play. Investments in renewable energy, batteries, electric vehicles, related infrastructure, and environmental management all have a bright future. Grid parity will be game-changing.
  • Health: Rising disposable incomes are driving demand for healthcare products and services. The opportunity set is diverse. The proposed holdings include a leading hospital, contract research providers and an internet healthcare platform.
  • Wealth: Growing prosperity means structural growth for consumer finance, such as wealth management and insurance protection, as well as increasing investor participation on stock exchanges.

In China, standards of disclosure, reporting and access to management are increasingly moving towards international norms. Many Chinese companies are also moving up the quality curve steadily. China is already the leading global manufacturer of solar panels and wind turbines.

This quality aspect extends to the environment, social and governance (ESG) front as well. abrdn is finding that more and more Chinese companies are beginning to understand and appreciate the importance of, and value that can be created by, engaging with long-term investors and becoming more cognisant of ESG issues. Increasingly they are aware of their carbon footprint. They are realising that implementing sustainable practices can improve brand perception, customer loyalty and, ultimately, the share price. It can also help to guard against catastrophes that can have legal ramifications. abrdn is also engaging companies on social factors, such as how they interact with employees, vendors and society, explaining how supporting employee well-being can lead to a more productive workforce and help them to recruit and retain talent.

In all this, abrdn remains positive about the long-term prospects for Chinese equities and believes the private sector retains a critical role in ensuring that the Chinese economy continues to innovate and prosper and that China reaches its goal of being a moderately prosperous nation by 2035.

Important information

Risk factors you should consider prior to investing:

  • The value of investments and the income from them can go down as well as up and you may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment trusts are specialised investments and may not be appropriate for all investors.
  • There is no guarantee that the market price of a Trust’s shares will fully reflect its underlying Net Asset Value.
  • As with all stock exchange investments the value of the Trust shares purchased will immediately fall by the difference between the buying and selling prices, the bidoffer spread. If trading volumes fall, the bid-offer spread can widen.
  • Investment trusts can borrow money in order to enhance investment returns. This is known as ‘gearing’ or ‘leverage’. However, the use of gearing can result in share prices being more volatile and subject to sudden or large falls in value. Where permitted an investment trust may invest in other investment trusts that utilise gearing which will exaggerate market movements, both up and down.
  • Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. This may mean your money is at greater risk. 
  • Investing globally can bring additional returns and diversify risk. However, currency exchange rate fluctuations may have a positive or negative impact on the value of your investment. 
  • Specialist funds which invest in small markets or sectors of industry are likely to be more volatile than more diversified trusts. 

Other important information:

Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419. An investment trust should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments. Find out more at www.abrdnchina.co.uk or by registering for updates. You can also follow us on Twitter or LinkedIn.

GB-061021-158645-1

Average UK property value hits record high

Safiya Bashir
-
0
Average UK property value hits record high

New data from Halifax has found that the average cost of property in the UK has jumped to £272,992, which is a 15-year high.

The average house price in London is £521,129, which continues to be much more expensive than the rest of the UK.

Russell Galley, managing director of Halifax, commented: “This is the fifth straight month that average house prices have risen, with typical values up by almost £13,000 since June, and more than £20,000 since this time last year.”

“On a rolling quarterly basis the uptick in house prices was 3.4%, the strongest gain since the end of 2006, bringing the new average property price up to a record high of £272,992.”

“The performance of the market continues to be underpinned by a shortage of available properties, a strong labour market and keen competition amongst mortgage providers keeping rates close to historic lows.”

Guy Gittins, the chief executive of Chestertons commented on today’s figures and said: “We normally see a seasonal market slowdown towards the end of the year but, this November, witnessed a comparably active market instead. Our offices registered a 16% increase in sales vs October, which proves that buyer appetite remains strong.

“November’s strong buyer demand has reduced the supply of properties available for sale which, at the end of November, was 12% lower than the same time last year.

”As a result of demand outstripping supply, the market has seen a 30% drop in sellers willing to lower their asking prices. Looking ahead, we are still seeing plenty of unsatisfied buyer demand with enquiries up 12% from November last year,” 

Paragon Banking profits up 62%

Safiya Bashir
-
0
Paragon Banking profits up 62%

Paragon Banking Group saw underlying profits jump 61.8% to £194.2m in the year to 30 September. This is up from the  £120m profit recorded for the same period a year earlier.

The group has announced a full year dividend of 26p, which increased from 14.4p last year.

Nigel Terrington, chief executive, said: “We have delivered an outstanding performance in 2021, which is testament to the strength of our operating model, the quality of our customer base and the capability and adaptability of our people.”

“Every lending business in the Group has this year made excellent progress, and at over £2.6 billion, aggregate new lending now comfortably exceeds pre-pandemic levels. 

“We have made huge strides on the funding side, growing retail deposits by 18.4% at attractive rates, and have delivered significant digital improvements as part of the Group’s cloud-based strategy,” he added.

“We enter 2022 with strong pipelines at near-record levels, improved margins and the capital to continue to invest in and grow our business, as well as deliver additional returns for shareholders via a new buyback programme and materially increasing our full year dividend,”

Supreme reports growth in revenues

Safiya Bashir
-
0
Supreme reports growth in revenues

Supreme has reported a 9% growth in revenue to £61.1m.

The maker of goods including vapes reported a surge in revenue growth by 192% for its sports nutrition and wellness goods, as it acquired nutrition brand Sci-MX earlier this year. Supreme also acquired Millions & Millions and Vendek.

 “The combination of Supreme’s extensive retail relationships combined with our high volume, great value product proposition continued to underpin our strong profit performance in the first six months of trading in the current financial year,” said Sandy Chadha, the chief executive.

“Our market-leading Vaping category, alongside our high growth Sports Nutrition & Wellness division, continue to outperform their respective markets – further demonstrating our ability to attract and maintain consumer demand.”

“The second half of the current financial year has started well and our established business model, alongside our diverse product portfolio, provides the Board with confidence in the Group delivering a good performance in the second half and beyond.”

New AIM admission: Ondine Biomedical returns to AIM

Andrew Hore
-
0
New AIM admission: Ondine Biomedical returns to AIM

A decade after it was taken private by current chief executive Carolyn Cross, Ondine Biomedical Inc has returned to AIM. The previous AIM quotation was cancelled on 7 September 2011 and the TSX listing was also cancelled. The value of the deal was C$3.19m and the flotation value is more than 50 times that, although it does include new money.
Hospital acquired infections is an enormous potential market. Revenues are starting to accelerate as the company’s first product is being used in Canadian hospitals to reduce drug resistant infections, as well as at a meat processing plant. Nasal infection...

New AIM admission: Windward AI lead

Andrew Hore
-
0
New AIM admission: Windward AI lead

Windward Ltd has developed AI-based software that enables real-time information about seafaring vessels to be transmitted to their owners. Windward has already spent $25m developing its technology. This is an enormous potential market.
Management argues that Windward is the only company that has complete coverage of security, safety, compliance, environment and ocean freight. Competitors operate in up to three of these segments.
The cash raised will fund further development and additional data sources, as well as helping to boost sales and marketing. The shares opened at 162.5p and ended the d...

Hardide Finals: Running downhill to Recovery

Jon Levinson
-
0
Hardide Finals: Running downhill to Recovery

Hardide (LSE: HDD) reported its depressed Covid finals for the Y/E September 2021 and as expected it was a hacking great LBT (Loss before Tax) of £2.8m on £3.6m Revenue.
The 28% fall in revenue was accompanied by a 1% increase in Administration costs to £2.8m although going forward  a relocation into more efficient premises is expected to make savings of £100k. In February  £0.8m was raised at 30.9p a share and along with a soft Covid loan of £250k cash is around £1.5m. The Board are confident that maintaining  its production capacity, during these hard Covid time, will pay dividends.
HDD dev...

FTSE 100 gains as Omicron concerns take a backseat

UK Investor Magazine
-
0
FTSE 100 gains as Omicron concerns take a backseat

The FTSE 100 gained on Monday as investors stepped in to take advantage of lower prices delivered by selling late last week.

The confidence to take shares higher stemmed from optimism around the impact of the Omicron and possibilities the strain may be Midler than first thought.

“Monday brought a solid rise for the FTSE 100 despite the continued spread of the Omicron variant as investors reacted positively to suggestions from officials in the US and South Africa that the latest strain of Covid might carry milder symptoms,” says AJ Bell investment director Russ Mould.

“It doesn’t feel like we are out of the woods yet, particularly as, even if this definitely proves to be the case, increased transmissibility could mean a wave of hospitalisations from a lower proportion of people getting really sick.”

“It still feels like we’re in the guesswork stage of working out what the impact of Omicron will be so it would be naïve to rule out further volatility as markets attempt to work out exactly what’s going on.”

Commodity shares were big gainers and added a significant number of points to the FTSE 100 on Monday morning.

Commodity prices rose after China cut their reserve ratio and Saudi Arabia increased their oil prices.

“BP and Shell helped give the FTSE 100 some support as Saudi Arabia lifted its official oil prices as it looked to address the recent slide in crude,” said Mould.

BP and Shell were both up 1.9% at the time of writing.

The commodities space was also helped by the decision in China to cut their reserve ratio for banks.

The reserve requirement ratio (RRR) dictates how much capital banks have to hold in reserve. Lowering the RRR will improve banks’ liquidity in an effort to encourage them to increase lending and boost the economy, in the face of ongoing property concerns.

New AIM Admission: Skillcast compliance opportunity

Andrew Hore
-
0
New AIM Admission: Skillcast compliance opportunity

Skillcast Group provides content and software to companies for their training and compliance requirements. The UK is the main market, but there are also customers in the EU and other parts of the world.
There were annual recurring revenues of £5.06m at the end of June 2021 - they were below £3m at the end of 2018. The subscription revenues continue to grow, while professional services revenues are being maintained. The business has consistently generated cash and does not appear to capitalise development costs.
The shares are tightly held with the board and five other shareholders owning more ...

New Aquis admission: Hydrogen Future Industries SPAC

Andrew Hore
-
0
New Aquis admission: Hydrogen Future Industries SPAC

Hydrogen Future Industries was originally going to be called Hydrogen One, but the name was similar to an existing quoted company, so it had to be changed, which delayed the flotation. There is a long list of potential assets that the company would consider acquiring. It covers most things that have a connection to hydrogen.
Hydrogen Future Industries believes that the quotation will improve its negotiating position and help to find an acquisition.
The shares opened at 10.5p (10p/11p) and stayed at that price for the first three days of trading. There were 370,000 shares traded on the first da...

1...860861862...1,834Page 861 of 1,834