Guinness GI launches China A share fund

Guinness Global Investors has launched the Guinness China A Share Fund, offering investors access to a concentrated portfolio of Chinese firms.

The fund will be 100% invested in China A shares and have a portfolio of 30 stocks. Guinness said it will seek out companies which are well governed, financially sound and operationally efficient, with good cash generation.

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Companies selected must fit into the Guinness structural thematic framework, generate a return on capital above the cost of capital, have debt of no more than 150% of the value of their equity, and have a minimum $500m market capitalisation.

The China A share fund is the second China focused vehicle offered by the asset manager. It joins the Guinness Greater China Fund, which was renamed from the Guinness Best of China Fund in January to reflect its focus on stocks across China, Hong Kong and Taiwan.

The new offering will be managed by the same team; Sharukh Malik and Edmund Harriss. It will come with a ‘Founder Z class' fee of 0.35%.

The thematic framework for the fund is built upon changes seen in incomes, demographics, production advances and the application of technology in consumer, industrial and infrastructure settings, Guinness said.

Malik and Harriss believe A shares are underrepresented in the global equity market and expect this gap to close over time, driven by their rising inclusion in benchmarks.

They also see the A share market as offering wider choice, with more focused and liquid exposure to China's structural growth themes than can be found through stocks listed in Hong Kong and overseas.

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China A shares offer investors the benefits of diversification given their low correlation to developed markets, according to Guinness.

Malik said: "As China has moved on from Covid, now is an excellent time to be launching a dedicated China A share strategy. We aim to take advantage of China's plan to become a higher income country, giving the fund exposure to themes such as the Rise of the middle class, manufacturing upgrades and the shift towards cleaner energy.

"The model fund's holdings have historically grown earnings at a premium to the broader market, and we expect this to continue given our disciplined approach to investing in China."