China-focused equity funds on course for weakest performance in 3 years

[NEW YORK] Overseas equity funds with exposure to Chinese equities are on course to deliver their weakest performance in three years, as the stocks were hit by an economic slowdown, a tech crackdown and an increase in default risks in the property sector.

Refinitiv Lipper data showed that China-focused overseas equity funds have shed 9.2 per cent on average so far this year. They delivered a return of 47.1 per cent and 33.3 per cent in 2020 and 2019 respectively, the data showed.

Profunds UltraChina ProFund;Investor, BCAP China Technology, TMB China Opportunity and MTF TR (E) Bluestar China Internet Software (4D) were leading the decliners this year, dropping more than 25 per cent each so far this year.

China's Shanghai Composite index has gained just 3.45 per cent this year, and is the fourth worst performer among Asian stock markets this year, based on Refinitiv Lipper data.

"Major regulatory reforms collided with a potential default scenario with some of the largest property developers after the country tightened its funding sources," fund research group Morningstar said in a report.

"The regulatory consolidation in China swept up large e-commerce and education names. It comes as no surprise that Greater China-focused funds saw a deep drawdown," it said.

Similarly, China-focused overseas bond funds have risen just 0.4 per cent on average, compared with a gain of 8.5 per cent in 2020.

Among bond funds, HSBC China High Yield Bond Fund Acc TWD , BEA Union Investment China High Yield Income A USD Dis and Jih Sun China High Yield Bond Fund A TWD led the decliners this year, based on Refinitiv Lipper data.

REUTERS