China-focused mutual funds in September
In this series, we’ll be analyzing the monthly performance of four China-focused mutual funds for September 2015. These four funds include the following:
- Clough China Fund Class A (CHNAX)
- Fidelity China Region Fund Class C (FHKCX)
- John Hancock Greater China Opportunities Fund Class A (JCOAX)
- Matthews China Fund Investor Class (MCHFX)
But first, let’s look at the broad picture of the Chinese economy.
China’s manufacturing and industrial production shrinks
Production and purchasing activities in China are shrinking, mainly because of a weak demand from both domestic and export clients. The flash reading of the Caixin China General Manufacturing PMI (Purchasing Managers’ Index) for September stood at 47.0, down from August’s final reading of 47.3.
Production declined as total new orders fell sharply. Similarly, China’s industrial production data were weaker than expected at a 6.1% year-over-year growth in August.
Factory output is shrinking rapidly in China due to a decline in new orders, which in turn affects the revenues of large multinational companies such as Apple (AAPL), Ford Motor (F), and Boeing (BA), which all have large exposures to the Chinese market.
China’s overall business sentiment is down
The MNI China Business Sentiment Indicator fell 8.4% to 51.3 in September from a revised 56.0 in August. The indicator was down due to the unchanged US federal funds rate. Domestic factors such as the stock market meltdown in August also adversely impacted business sentiment. However, companies saw the benefit of a cheaper yuan and easy accessibility of credit.
After the surprise yuan devaluation by the People’s Bank of China (or PBOC) in August, the equities market around the globe tumbled, and financial volatility increased. With the slowdown in the Chinese economy, achieving a gross domestic product (or GDP) growth rate of around 7% in 2015 seems difficult. There are also rising concerns of a slowdown in the world economy.
In the rest of this series, we’ll look at how the funds are performing.