The aim of this series is to do a performance analysis of three Chinese mutual funds for the quarter ended September 30, 2015. They are:
- Eaton Vance Greater China Growth Fund (EVCGX)
- Shelton Greater China Fund (SGCFX)
- Guinness Atkinson China and Hong Kong Fund (ICHKX)
But before that, let’s take a look at the broad picture of the Chinese economy.
Weak export orders and slowing GDP
In September 2015, exports fell by 3.7% on a year-on-year (or YoY) basis. Exports were down mainly due to weak global demand. A fall in industrial production and a rise in labor cost could be making China less competitive in the global market.
The Chinese government has downwardly revised its 2015 gross domestic product (or GDP) growth rate. China is aiming at a 7% growth rate in 2015, due to slowing global demand for Chinese exports and weak domestic demand. China’s economy had slowed down to a 7.4% pace in 2014 from 7.7% in 2013, its slowest growth rate in the last 24 years.
China’s manufacturing output is shrinking
The Caixin China Manufacturing Purchasing Managers’ Index (or PMI) fell and stood at 47.2 in September 2015, compared to 47.3 in August. This indicator shows that China’s manufacturing activity could be deteriorating at a faster pace.
Growth in China’s manufacturing output was restricted by worsening business conditions and subdued local and foreign demand. Chinese firms are cutting their production due to rapidly shrinking new export orders.
The uncertainty regarding China could be increasing fears of a global slowdown among investors. As a result, companies such as Apple (AAPL), Ford (F), General Motors (GM), and Nike (NKE), all with sizable revenue emanating from their operations in China, may fall.
Volatility in Chinese stock market
Time and again, the Chinese stock market has fallen, impacting other stock markets along with it. The uncertainty regarding China has had a drastic impact on small investors in the country, some of whom had taken loans to invest in stocks.
On a global level as well, nations are eyeing the Chinese economy, stocks, and related instruments closely. On that note, let’s begin our assessment of the performance of China-focused mutual funds mentioned above.