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TCWAX Fell Due to Weak Global Demand

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Investment objective and strategy

The objective of the Templeton China World Fund – Class A (TCWAX) is to achieve long-term capital appreciation by investing at least 80% of its net assets in Chinese companies’ securities. The Chinese companies are:

  • companies organized under the laws of, or with a principal office in, the People’s Republic of China, Hong Kong, or Taiwan
  • companies whose principal trading market is in China, Hong Kong, or Taiwan
  • companies that derive at least 50% of their revenue from goods or services sold or produced in China
  • companies that have at least 50% of their assets in China

The fund’s strategy is to conduct in-person visits and perform extensive fundamental research to model a company’s potential future earnings, cash flow, and asset value relative to its stock price. It evaluates a company’s potential for earnings and growth over a five-year horizon.

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Fund facts

TCWAX had net assets of $386.4 million as of November 30, 2015. The fund has a net expense ratio of 1.9%. The fund was incepted on September 9, 1993.

Performance evaluation

For the month ending on November 30, 2015, TCWAX fell by 2.8%. Weakness in global demand and lower commodity prices caused the fund’s negative performance.

For the three months ending as of November 30, 2015, the returns rose by 4.4%. Meanwhile, the fund’s returns fell by 10.4% YTD (year-to-date).

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Benchmarks

TCWAX benchmarks its performance to the MSCI Golden Dragon Index. In the one-month period ending in November 2015, the MSCI Golden Dragon Index fell by 3.3%.

Portfolio composition

As of November 2015, the industrials sector dominated the portfolio composition. It had an ~20% weight. It’s followed by consumer staples, consumer discretionary, and financials with a 15.8%, 15.3%, and 14.6% weight, respectively.

Top holdings

As of November 2015, the top ten holdings of TCWAX accounted for 51.2% of the total portfolio. Taiwan Semiconductor Manufacturing (TSM), Tencent Holdings (TCEHY), China Mobile (CHL), Baidu (BIDU), and China Construction Bank (CICHY) were among the top ten holdings. The fund has 55 positions as of November 30, 2015.

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