Sharukh Malik, portfolio manager, Asian & Emerging Markets, at Guinness Global Investors discusses the outlook for Asian markets – what's next for China given its ongoing zero-Covid policy, and what the firm is doing to capitalise on opportunities in the region.

Sharukh Malik, portfolio manager at Guinness Global Investors, has announced the launch this month of a China A-shares fund aimed at capitalising on opportunities in the region, and adding to the firm's Asian-focused funds. 

The move, which was announced at a media lunch in London last week, aims to exploit positive prospects on the Chinese market.

Speaking at the event, Malik, portfolio manager of Guinness Global Investors Best of China Fund since 2020, highlighted the benefits of investing in China, despite the country’s zero-Covid policy.

Reasons behind the policy, he said, are that not enough older people have vaccinated against the disease, due to a lack of education. He thinks that this is starting to change, with restrictions being eased, and the country could open up by the summer of 2023.  

This was echoed by Ronald Chan, chief investment officer at Hong Kong-based investment firm Chartwell Capital. He said Covid restrictions in China have already loosened, partly because the vaccination rate for the elderly has largely increased over the past months, although not reaching an ideal level. 

“Hence, as this rate continues to show improvement, we shall see further loosening,” Chan said.

Malik also drew attention to China’s favourable inflation rates, which are much lower than most of the developed world.  

According to forecasts by the International Monetary Fund, Chinese growth of between 4.5 per cent to 5.1 per cent is expected, compared with a slowdown and potential recession in the West. 

Malik said the long-term outlook for consumption growth remains strong, with the rise of the middle class set to continue, and China’s urban elite growing as the economy grows.

Carbon
Decarbonisation is another trend to watch. China now leads the world in clean energy production and produces more than 70 per cent of all solar photovoltaic panels, half of the world’s leading electric vehicles and a third of its wind power. 

Malik thinks that renewables will help drive the economy.  

Guinness’s Best of China Fund, which Malik manages, invests in Xinyi Solar, the world’s largest supplier of glass used in solar panels. 

By theme, the fund’s largest exposures are the rise of the middle class, followed by manufacturing upgrades and sustainability, as well as cloud computing and healthcare. 

On a sector basis, the fund is overweight in information technology, investing in Venustech, a provider of cybersecurity services, and TSMC.

Other funds include Guinness Emerging Markets Equity Income Fund and Asian Equity Income Fund.

The firm also announced a new China A-shares fund, due to be launched later this month, which will take advantage of opportunities in the region.