Distinct characteristics of each market's Chinese listings

In the past, foreign investors invested primarily in China through Hong Kong-listed stocks. With more Chinese companies being publicly listed  in the US, investors have gained wider access to Chinese equities. In addition, with China's local A-shares market opening up, investors can now directly trade Shanghai and Shenzhen-listed companies through Stock Connect programmes, further expanding  investment opportunities in China. 

Hong Kong-listed Chinese companies are mainly old-economy stocks, such as financials, telecommunications, and public utilities, except several technology giants. Meanwhile, US-listed Chinese companies are focused on consumer discretionary and telecommunications. In comparison, the mainland A-shares market comprises of more diverse new economy stocks, particularly in travel, entertainment, 5G equipment, health care, industrial automation, new energy automobile, and biotechnology sectors, which expands investors' horizons and investment options. 

Mr Anthony Wong, Allianz Global Investors' co-lead manager for Allianz All China Equity said, "Chinese corporations listed in these three markets have their distinct attributes and target a unique group of investors. This explains how an integrated strategy can make up for each market's shortcomings as the portfolio tells a fascinating, diversified China growth story."

New opportunities with the return to Hong Kong Exchange

As US-China tensions escalate, it is noteworthy that several US-listed Chinese companies intend to move their listings to Hong Kong's stock exchange. Mr Wong indicated that foreign listed Chinese companies' homecoming plans to Hong Kong or the mainland A-shares markets may eliminate market uncertainties. "Among these foreign listed Chinese companies, many are high-quality businesses that can benefit from China's long-term structural change. As they return to mainland China or Hong Kong's stock exchanges, they may attract more attention from local investors in the mainland and Hong Kong, which will likely expand their investor base and bring in more opportunities."

Our three investing rules: Growth, quality and valuation 

When selecting Chinese stocks from the three markets, Mr Wong strictly follows three principles: growth, quality and valuation. For growth, he targets stocks with long-term profitable growth that is better than the market or peers. Secondly, he avoids being swayed by market sentiment and selects shares that are reasonably valued. Thirdly, he emphasizes the company's quality, such as financials and corporate governance. 

Mr Wong added that if he is not confident enough in a company's management or corporate governance, even if the company's data demonstrated speedy growth, he would not consider investing in the business to avoid potential landmines. "We intended our asset allocation to cover all industries, with a focus on discovering stocks from every sector that we believe could outperform the market. However, in our experience, high-quality growth stocks are usually concentrated in several particular sectors."

In the second half of the year, Mr Wong aims to search for stocks that will benefit from China's economic recovery. That includes domestic consumption-driven stocks, such as home appliances, automobile, travel and entertainment, as well as sectors that benefit from economic stimulus measures, such as the construction equipment supply chain.

Allianz All China Equity :
• Allianz All China Equity (the “Fund”) aims at long-term capital growth by investing in onshore and offshore People's Republic of China ("PRC"), Hong Kong and Macau equity markets.
• The Fund is exposed to significant risks of investment/general market, country and region, emerging market, company-specific, currency (such as exchange controls, in particular RMB), and the adverse impact on RMB share classes due to currency depreciation. The Fund may invest in the China A-Shares market via the Stock Connect and RQFII regime and thus is subject to the associated risks (including quota limitations, change in rule and regulations, trade restrictions, clearing and settlement, China market volatility and uncertainty, change in economic, social and political policy in PRC and taxation risks).
• The Fund may invest in financial derivative instruments ("FDI") which may expose to higher leverage, counterparty, liquidity, valuation, volatility, market and over the counter transaction risks. The Fund's net derivative exposure may be up to 50% of the Fund's net asset value.
• This investment may involve risks that could result in loss of part or entire amount of investors' investment.In making investment decisions, investors should not rely solely on this material.
Note: Dividend payments may, at the sole discretion of the Investment Manager, be made out of the Fund's capital or effectively out of the Fund's capital which represents a return or withdrawal of part of the amount investors originally invested and/or capital gains attributable to the original investment. This may result in an immediate decrease in the NAV per share and the capital of the Fund available for investment in the future and capital growth may be reduced, in particular for hedged share classes for which the distribution amount and NAV of any hedged share classes (HSC) may be adversely affected by differences in the interests rates of the reference currency of the HSC and the base currency of the Fund.

1. Grassroots Research^® is a division of Allianz Global Investors that commissions investigative market research for asset-management professionals. Research data used to generate Grassroots Research^® reports are received from independent, third-party contractors who supply research that, subject to applicable laws and regulations, may be paid for by commissions generated by trades executed on behalf of clients.

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