Active is: Expanding the boundaries of investing

Nine themes for investing in China’s transformation

18/11/2021
Nine themes for investing in China’s transformation

Summary

As China’s economy quickly transforms itself, a thematic approach based on structural macro trends is an effective way to identify the winners.

Key takeaways

  • China is transforming into a high-tech leader, developing semiconductors, solar panels, artificial intelligence technology, biotechnology and dynamic new business models
  • But only a small segment of companies will be “winners” – which is why investors may want to turn to a thematic approach as an effective way to participate in change
  • We’ve defined a set of themes – including environmental commitment, healthcare transformation and food security – to help identify companies best positioned to profit from the country’s rapid transformation

Only ten years ago, China had a reputation as the “workshop of the world” – a country where goods were not only mass-produced, but intellectual property was disregarded and products were copied. It was far from being the pioneering marketplace that it is now. In fact, China today leads the development of semiconductors, solar panels, artificial intelligence technology, biotechnology and dynamic new business models.

At Allianz Global Investors’ June 2021 Asia Conference, one of the key topics was how China’s high-tech transformation has unfolded. Head of Thematic Equity Andreas Fruschki, Portfolio Manager Shibo Wang and Director of Research Terence Law explained how China has changed fundamentally. Patent filings within the country are outpacing those in North America by three to one.  In terms of research and development investment, China ranks second in the world, just behind the US.

In truth, China is transforming far faster than anywhere else in the world. Macroeconomic trends across several dimensions define its rapid evolution: strong economic growth, decarbonisation, urbanisation, technology innovation, deep industrialisation, increasing disposable income and demographic change. Taken together, these trends mean that China is likely to be as different 10 years from now as it was in 2010.

The winning themes

Just as at any time of rapid structural change, however, there are winners and losers. “Only a small segment of companies will be winners from China’s growth themes,” noted Mr Fruschki. “That is what you can identify with a thematic approach to investing. It’s a very effective way to participate in change.”

Drilling down into China’s broad macro trends, Allianz Global Investors has defined a set of themes to help identify those companies best positioned to profit from the country’s rapid transformation. The current list of themes includes:

  1. Import substitution
  2. New consumption
  3. Environmental commitment
  4. Digital life
  5. Healthcare transformation
  6. Frontier technology
  7. Quality education
  8. Financial inclusion
  9. Food security

Import substitution, the environment and consumption

The first three themes in particular illustrate the emerging investment opportunities. For instance, “import substitution” describes the growing number of Chinese companies that are catching up with foreign competitors and taking market share. On a recent research trip, Mr Wang visited several companies along the semiconductor value chain, which are developing fast due to growing demand for chips.

“The good news is that today it’s not just computers that need semiconductor chips, but also TVs, cleaning robots and the whole development of the internet of things,” he noted. “This offers a great opportunity for young Chinese semiconductor companies to finance their R&D spending.”

Turning to new consumption, the pandemic’s aftermath is disproportionately favouring high-end Chinese brands instead of the old European favourites. “People are spending their money on high-end Chinese brands,” said Mr Wang. “Some of these companies are growing very fast, especially if they have innovative business models.”

Another major theme is environmental commitment. In 2020, President Xi Jinping pledged that China would become carbon-neutral by 2060. Chinese businesses are already leading the global transition. China has the world’s largest market for electric vehicles, by far the biggest lithium-ion battery manufacturing capacity and the largest usage of polysilicon for solar panels.

“We believe that the journey to carbon neutrality will result in significant winners and losers,” explained Mr Wang.

Like other countries throughout history, China is undergoing an economic revolution that will enrich the architects of change. What makes today’s China different, however, is the sheer pace of reinvention. The investor’s challenge is to identify the winners – a task that can be simplified by focusing on the country’s growth themes.

 

 

Download PDF

 

Active is: Anticipating what’s ahead

2022 outlook

07/12/2021
2022 outlook

Summary

Be proactive and prepare for volatility in 2022 – and align with the long-term trends that could offer opportunities for investors.

Allianz Global Investors

You are leaving this website and being re-directed to the below website. This does not imply any approval or endorsement of the information by Allianz Global Investors Asia Pacific Limited contained in the redirected website nor does Allianz Global Investors Asia Pacific Limited accept any responsibility or liability in connection with this hyperlink and the information contained herein. Please keep in mind that the redirected website may contain funds and strategies not authorized for offering to the public in your jurisdiction. Besides, please also take note on the redirected website’s terms and conditions, privacy and security policies, or other legal information. By clicking “Continue”, you confirm you acknowledge the details mentioned above and would like to continue accessing the redirected website. Please click “Stay here” if you have any concerns.

Welcome to Allianz Global Investors

Select your language
  • 中文(繁體)
  • English
Select your role
  • Individual Investor
  • Intermediaries
  • Other Investors
  • Pension Investors
  • Allianz Global Investors Fund (“AGIF”)

    • Allianz Global Investors Fund (“AGIF”) as an umbrella fund under the UCITS regulations has within it different sub-funds investing in fixed income securities, equities, and derivative instruments, each with a different investment objective and/or risk profile.

    • All sub-funds (“Sub-Funds”) may invest in financial derivative instruments (“FDI”) which may expose to higher leverage, counterparty, liquidity, valuation, volatility, market and over the counter transaction risks. A Sub-Fund’s net derivative exposure may be up to 50% of its NAV. 

    • Some Sub-Funds as part of their investments may invest in any one or a combination of the instruments such as fixed income securities, emerging market securities, and/or mortgage-backed securities, asset-backed securities, property-backed securities (especially REITs) and/or structured products and/or FDI, exposing to various potential risks (including leverage, counterparty, liquidity, valuation, volatility, market, fluctuations in the value of and the rental income received in respect of the underlying property, and over the counter transaction risks). 

    • Some Sub-Funds may invest in single countries or industry sectors (in particular small/mid cap companies) which may reduce risk diversification. Some Sub-Funds are exposed to significant risks which include investment/general market, country and region, emerging market (such as Mainland China), creditworthiness/credit rating/downgrading, default, asset allocation, interest rate, volatility and liquidity, counterparty, sovereign debt, valuation, credit rating agency, company-specific, currency  (in particular RMB), RMB debt securities and Mainland China tax risks. 

    • Some Sub-Funds may invest in convertible bonds, high-yield, non-investment grade investments and unrated securities that may subject to higher risks (include volatility, loss of principal and interest, creditworthiness and downgrading, default, interest rate, general market and liquidity risks) and therefore may adversely impact the net asset value of the Sub-Funds. Convertibles will be exposed prepayment risk, equity movement and greater volatility than straight bond investments.

    • Some Sub-Funds may invest a significant portion of the assets in interest-bearing securities issued or guaranteed by a non-investment grade sovereign issuer (e.g. Philippines) and is subject to higher risks of liquidity, credit, concentration and default of the sovereign issuer as well as greater volatility and higher risk profile that may result in significant losses to the investors. 

    • Some Sub-Funds may invest in European countries. The economic and financial difficulties in Europe may get worse and adversely affect the Sub-Funds (such as increased volatility, liquidity and currency risks associated with investments in Europe).

    • Some Sub-Funds may invest in the China A-Shares market, China B-Shares market and/or debt securities directly  via the Stock Connect or the China Interbank Bond Market or Bond Connect and or other foreign access regimes and/or other permitted means and/or indirectly through all eligible instruments the qualified foreign institutional investor program regime and thus is subject to the associated risks (including quota limitations, change in rule and regulations, repatriation of the Fund’s monies, trade restrictions, clearing and settlement, China market volatility and uncertainty, China market volatility and uncertainty, potential clearing and/or settlement difficulties and, change in economic, social and political policy in the PRC and taxation Mainland China tax risks).  Investing in RMB share classes is also exposed to RMB currency risks and adverse impact on the share classes due to currency depreciation.

    • Some Sub-Funds may adopt the following strategies, Sustainable and Responsible Investment Strategy, SDG-Aligned Strategy, Sustainability Key Performance Indicator Strategy (Relative), Green Bond Strategy, Multi Asset Sustainable Strategy, Sustainability Key Performance Indicator Strategy (Absolute Threshold), Environment, Social and Governance (“ESG”) Score Strategy, and Sustainability Key Performance Indicator Strategy (Absolute). The Sub-Funds may be exposed to sustainable investment risks relating to the strategies (such as foregoing opportunities to buy certain securities when it might otherwise be advantageous to do so, selling securities when it might be disadvantageous to do so, and/or relying on information and data from third party ESG research data providers and internal analyses which may be subjective, incomplete, inaccurate or unavailable and/or reducing risk diversifications compared to broadly based funds) which may result in the Sub-Fund being more volatile and have adverse impact on the performance of the Sub-Fund and consequently adversely affect an investor’s investment in the Sub-Fund. Also, some Sub-Funds may be particularly focusing on the GHG efficiency of the investee companies rather than their financial performance which may have an adverse impact on the Fund’s performance.

    • Some Sub-Funds may invest in share class with fixed distribution percentage (Class AMf). Investors should note that fixed distribution percentage is not guaranteed. The share class is not an alternative to fixed interest paying investment. The percentage of distributions paid by these share classes is unrelated to expected or past income or returns of these share classes or the Sub-Funds. Distribution will continue even the Sub-Fund has negative returns and may adversely impact the net asset value of the Sub-Fund.  Positive distribution yield does not imply positive return.

    • Investment involves 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 [website/material].

    Note: Dividend payments may, at the sole discretion of the Investment Manager, be made out of the Sub-Fund’s capital or effectively out of the Sub-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 Sub-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 respective Sub-Fund. Dividend payments are applicable for Class A/AM/AMg/AMi/AMgi/AQ Dis (Annually/Monthly/Quarterly distribution) and for reference only but not guaranteed.  Positive distribution yield does not imply positive return. For details, please refer to the Sub-Fund’s distribution policy disclosed in the offering documents.

     


    Allianz Global Investors Asia Fund

    • Allianz Global Investors Asia Fund (the “Trust”) is an umbrella unit trust constituted under the laws of Hong Kong pursuant to the Trust Deed. Allianz Thematic Income and Allianz Selection Income and Growth and Allianz Yield Plus Fund are the sub-funds of the Trust (each a “Sub-Fund”) investing in fixed income securities, equities and derivative instrument, each with a different investment objective and/or risk profile.

    • Some Sub-Funds are exposed to significant risks which include investment/general market, company-specific, emerging market, creditworthiness/credit rating/downgrading, default, volatility and liquidity, valuation, sovereign debt, thematic concentration, thematic-based investment strategy, counterparty, interest rate changes, country and region, asset allocation risks and currency (such as exchange controls, in particular RMB), and the adverse impact on RMB share classes due to currency depreciation.  

    • Some Sub-Funds may invest in other underlying collective schemes and exchange traded funds. Investing in exchange traded funds may expose to additional risks such as passive investment, tracking error, underlying index, trading and termination. While investing in other underlying collective schemes (“CIS”) may subject to the risks associated to such CIS. 

    • Some Sub-Funds may invest in high-yield (non-investment grade and unrated) investments and/or convertible bonds which may subject to higher risks, such as volatility, creditworthiness, default, interest rate changes, general market and liquidity risks and therefore may  adversely impact the net asset value of the Fund. Convertibles may also expose to risks such as prepayment, equity movement, and greater volatility than straight bond investments.

    • All Sub-Funds 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 use of derivatives may result in losses to the Sub-Funds which are greater than the amount originally invested. A Sub-Fund’s net derivative exposure may be up to 50% of its NAV.

    • These investments 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 website.

    Note: Dividend payments may, at the sole discretion of the Investment Manager, be made out of the Sub-Fund’s income and/or capital which in the latter case 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 distribution unit and the capital of the Sub-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 Sub-Fund. Dividend payments are applicable for Class A/AM/AMg/AMi/AMgi Dis (Annually/Monthly distribution) and for reference only but not guaranteed.  Positive distribution yield does not imply positive return. For details, please refer to the Sub-Fund’s distribution policy disclosed in the offering documents.

     

Please indicate you have read and understood the Important Notice.