James Liu

Portfolio Manager

APS Asset Management Pte. Ltd.

In recent years China has staked its claim as a world economic superpower. Its economy has continued to power ahead while many other developed nations are still dealing with the aftermath of the economic crisis. Rising living standards and purchasing power and a growing middle class are just some of the driving forces behind its amazing economic growth story. The WIOF China Performance Fund allows investors to be part of that story, offering investment opportunities through equity markets on the Chinese mainland.



China’s economy has grown phenomenally since it was reformed and opened up more than two decades ago. The last 20 years have seen the creation of a modern, market-based economy whose growth has continuously outpaced the world’s major economies. Urbanisation on a massive scale and the foundation of ever-expanding giant metropolises around the country has promoted growth across all sectors. At the same time, hundreds of thousands of domestic firms have sprung up, from small and medium sized enterprises (SMEs) to large corporations, and China has become one of the most competitive business environments in the world.

Source: IMF


One of the key drivers of the economy has been the rise and continuing expansion of a massive middle class consumer base. This is driving the retail and other sectors as wealth is created and disposable income and consumption rises. This in turn is fostering the development of a sophisticated consumer economy with opportunities not just for domestic concerns but for global firms as well. And the middle class is set to get much, much bigger. According to the latest predictions from the UN, China’s middle class will be four times the size of America’s within the next two decades, with as many as 1.4 billion middle class consumers by 2030.



The Chinese demand for raw materials to fuel its rapid growth has been well documented. Chinese companies have invested heavily in, and established strong economic ties, with resource-rich regions of the world such as Africa, Latin America and Russia. But the Chinese market has also become one of the most attractive for leading firms from the developed world.

The economic transformation in China has also included the founding of equity markets which have proved to be not just another key driver of the economy but are also fast becoming a crucial source of finance for domestic SMEs. Today, China has more than 3,000 companies listed and a total capitalisation of more than USD4tn. The Shanghai stock exchange is one of the largest in the world.



But despite all the positives in China’s economic story, some questions have been raised over certain areas of the economy.

  • Inflation has become a concern, reaching a three-year-high in August, and interest rates have had to be repeatedly raised.
  • High levels of local government debt are also a problem.
  • A serious property bubble has arisen amid growing property speculation.
  • The banking sector has also come under scrutiny as speculation grows that local banks are facing problems with bad loans.
  • SME managers have recently said they are experiencing the tightest credit conditions for a decade while official production data points to a marked slacking in economic activity.

These factors have led some analysts to suggest that the Chinese economy could be in for a ‘hard landing’ in the near future.


Source: NAO, J.P. Morgan estimates



However, some of these concerns are unfounded and the ‘hard landing scenario’ is unlikely to be played out. The main objective of what has been China’s aggressive monetary tightening policy in the past 18 months – i.e. to stabilize non-food inflation – has already been achieved. Therefore, the need for further monetary tightening is reduced. As some inflationary pressure still remains and growth is slowing only modestly, the government is likely to maintain its current policy stance. Indeed, in light of the recent volatilities in global financial markets, weak US data, and uncertainty in Europe, the government will be very cautious in tightening domestic policy further. Meanwhile, more bank credit is expected to be given to SMEs. There are justified concerns about local government debt problems, which could drag on for some time and cast a cloud over bank shares. But a ‘hard landing’ is unlikely because if growth slows unexpectedly domestically or internationally, the government will intervene, providing fiscal stimulus packages, accelerating public housing and advancing infrastructure investments.



The Fund is managed by the award-winning Singapore-based investment boutique APS Asset Management Pte. Ltd. APS, which is independent, and employee-owned, is an active absolute return manager which focuses on deep fundamental value research. Its multi-national investment team hails from China, Korea, Japan, United States, Belgium, Malaysia, Vietnam and Singapore.



IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.