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East Capital China

East Capital China

NAV

2111.84 USD

1 day

+1.61%

YTD

+22.33%

Date

2025-07-18

Sustainability

Article 8

NAV

134.76 EUR

1 day

+0.89%

YTD

+9.07%

Date

2025-07-18

Sustainability

Article 8

NAV

143.77 SEK

1 day

+0.24%

YTD

+6.77%

Date

2025-07-18

Sustainability

Article 8

NAV

139.64 EUR

1 day

+0.89%

YTD

+9.39%

Date

2025-07-18

Sustainability

Article 8

NAV

141.15 USD

1 day

+1.61%

YTD

+22.70%

Date

2025-07-18

Sustainability

Article 8

Unique, opportunistic fund targeting high-quality but unloved Chinese companies

Chinese stocks (particularly those listed offshore) are currently trading at very attractive valuations and paying generous dividend yields despite solid earnings growth, driven by several years of poor investor sentiment and relentless selling by international investors. The East Capital China Fund aims to take advantage of this by investing in exciting but unloved companies across the Chinese investment universe, both onshore and offshore. The fund offers a uniquely strong combination of growth and value, with a P/E ratio of 7.3x for 2024 and 18% earnings growth implying a PEG ratio (price/earnings to growth) of 0.4x. The corresponding PEG ratio for the S&P500 is 2.2x.

We have a dynamic and high-conviction approach to portfolio construction, meaning that we remove holdings as soon as our conviction falls. This means we have higher turnover than many of peers, but also that we avoid the biases that plague most investors (such as inertia bias).

Our team of highly experienced emerging markets specialists is on-the-ground, based in Hong Kong. We have a long track record, with the core team having a combined 39 years of regional and industry experience. We were the first Nordic manager to invest in China A-shares back in 2014, and the first manager globally to invest through Stock Connect.

Fund Highlights

  • Chinese equity exposure (all shares)
  • Focus on high-quality, mid-cap companies with strong growth and free cash flow generation/shareholder distribution
  • Highly unique and differentiated fund with over 80% active share allocation
  • On-the-ground experienced investment management team based in Hong Kong

Product Broschure

The second quarter of 2025 was characterised by significant market volatility followed by a measured recovery. The quarter began with a sharp sell-off triggered by “Liberation Day” in early April, which marked a deterioration in US-China relations. Investor sentiment weakened rapidly, particularly in sectors exposed to external trade. However, by May, markets had regained stability, supported by sustained inflows from the National Team. These state-backed entities stepped in to contain downside risks and restore confidence. Following the resolution of the US-China trade agreement in Geneva, market activity turned more subdued, with investors cautiously awaiting fresh catalysts to sustain momentum.

The MSCI China All-Shares Index rose 2.3% in USD terms, while our China fund returned 1.3%, reflecting a modest underperformance of 1.0% alpha. Throughout the quarter, we maintained an active portfolio allocation of over 60%, reflecting our conviction in selected, high-quality names. Our strategy continues to emphasise alpha generation through a mix of sector rotation, bottom-up stock selection, and early exposure to underappreciated growth drivers, such as the ongoing re-rating of China’s biotech and innovation sectors.

The most disruptive event of the quarter was the escalation in US-China trade tensions. On 9 April, the US imposed a sweeping 125% reciprocal tariff on Chinese imports, with effective rates reaching nearly 145% due to earlier, fentanyl-related duties. In retaliation, China raised tariffs on US goods from 84% to 125% over the following days. The sudden escalation reignited fears of a full-scale trade war, sparking volatility across global markets. However, tensions eased in mid-May following high-level negotiations in Geneva. Both sides agreed to scale back the tariffs—down to 30% for the US and 10% for China—effective 14 May. While rates remained elevated compared to pre-crisis levels, the agreement was seen as a step toward de-escalation.

Despite the shock, China’s export sector demonstrated notable resilience. Although shipments to the US declined, exports to the European Union and ASEAN rose sharply. By mid-2025, both regions had surpassed the US as China’s largest export destinations, with exports to ASEAN alone exceeding USD 60 billion. This shift highlights China’s long-term efforts to diversify trade partners and reduce its reliance on the US market. Notably, export data for April and May came in above expectations, with year-on-year growth of 8.1% and 4.8%, respectively. These gains were partly driven by pre-tariff stockpiling, but also reflected strong demand in categories like electric vehicles, green energy components, and intermediate goods.

On the domestic front, consumer sentiment showed gradual improvement, albeit uneven across sectors. Among our portfolio holdings, Pop Mart delivered a standout performance. Its share price rose 69% during the quarter, contributing 133 basis points to alpha. The surge was fuelled by robust international demand, particularly in the US, where Q1 sales increased ninefold. This success demonstrates the growing influence of global growth drivers for Chinese consumer companies and the rising appeal of China-origin brands overseas. Pop Mart’s overseas expansion strategy, coupled with digital engagement and licensing partnerships, played a key role in its performance.

Sector-wise, financials emerged as the largest positive contributor to portfolio performance. The sector benefitted from steady inflows via Southbound Stock Connect, driven by demand from domestic insurers and long-duration capital seeking high-yielding, stable investments. With interest rates remaining low and dividend yields relatively attractive, financials gained favour among investors looking for defensive income plays. Our overweight in select high-quality names in the sector helped cushion portfolio volatility during the quarter.

Looking ahead, while geopolitical risks persist, the Geneva agreement has reduced near-term uncertainty. The risk of further tariff escalation has diminished, although long-term structural tensions between the US and China remain. Domestically, we expect the Chinese government to continue prioritising economic stabilisation. Policy momentum has picked up, with recent measures aimed at supporting consumption, improving SME access to credit, and stimulating infrastructure investment.

We believe Chinese equities remain underowned globally, leaving room for sentiment to improve meaningfully on the back of positive surprises. Valuations are still attractive, and fundamentals for many companies are intact. With a combination of targeted stimulus, improving trade diversification, and modest investor expectations, the second half of 2025 offers potential for renewed market momentum. We continue to position the portfolio with a focus on high-conviction, fundamentally strong names, aligned with long-term growth themes such as advanced manufacturing, consumer upgrading, and healthcare innovation.

 

 

Performance in USD net of fees.

The information should not be used as the sole basis for an investment. Please read the Prospectus and the KID, which are available on the fund page. This publication is not directed at you if we are prohibited by any law in any jurisdiction from making this information available to you and is not intended for any use that would be contrary to local laws or regulations. Every effort has been made to ensure the accuracy of the information, but it may be based on unaudited or unverified figures or sources.

Sector Allocation

Largest Holdings

Fund facts

Fund

East Capital China A USD

ISIN

LU1840853219

Launch date

2018-09-04

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

2.23%

Management fee

1.70%

Benchmark

MSCI China All Shares Index (Total Return Net)

Fund

East Capital China A EUR

ISIN

LU1840852328

Launch date

2018-09-05

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

2.25%

Management fee

1.70%

Benchmark

MSCI China All Shares Index (Total Return Net)

Fund

East Capital China A SEK

ISIN

LU1840854290

Launch date

2018-09-05

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

2.26%

Management fee

1.70%

Benchmark

MSCI China All Shares Index (Total Return Net)

Fund

East Capital China R EUR

ISIN

LU1840852914

Launch date

2018-09-05

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.72%

Management fee

1.20%

Benchmark

MSCI China All Shares Index (Total Return Net)

Fund

East Capital China R USD

ISIN

LU1840853722

Launch date

2018-09-05

Domicile

Luxembourg

Morningstar Rating™ (Total rating)

4

Yearly fee

1.74%

Management fee

1.20%

Benchmark

MSCI China All Shares Index (Total Return Net)

Risk indicator

Funds with risk class 6-7 can have sharp decreases or increases in value.

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More information

Reporting of the fund's historical returns does not consider inflation.

Performance prior to 03.09.2018 is represented by the East Capital China A-Shares Fund (LU1001588091) a Sub-fund of East Capital (Lux) SCA-SICAV SIF, whose assets were contributed to the share class on that date, and which had substantially the same investment strategy.

Investing through a financial intermediary may impact the investor’s rights to compensation in the event that compensation is paid due to errors or non-compliance.

2022-04-01

The merger of the Funds East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe with East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe (respectively) has been carried out in accordance with the submitted merger plan, which was approved by Finansinspektionen (the Swedish Financial Supervisory Authority) on 15 February 2022.

East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe thus ended on 1 April 2022.

Following the merger, former shareholders in East Capital Balkan, East Capital New Europe, East Capital Russia and East Capital Eastern Europe now own shares in East Capital Balkans, East Capital New Europe, East Capital Russia and East Capital Eastern Europe.

More information about the merger, such as the auditor's opinion on the exchange relationship, can be obtained from the management company East Capital Asset Management S.A. upon request.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by East Capital. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.mscibarra.com)