The AXA SPDB Chinese Equity A-Shares strategy focuses on small and mid-cap private companies believed to hold promising growth prospects – a deviation from the large-cap focused norm of Chinese equity investments.

“The strategy is biased toward small and mid-cap companies in industrial, service, IT, healthcare and consumption sectors rather than financials and energy, as we believe they offer higher growth prospects on sound fundamentals. In such a liquidity-driven market as China, we believe growth companies at a reasonable valuation should be our focus,” said Wendy Luo, AXA SPDB Investment Managers' portfolio manager, in a statement.

Luo referred to the companies in focus as being in the “sweet spot”, an area of the market that will allow investors to capitalise on China's transition to a more liberalised economy.

The launch follows AXA Investment Managers' quota allocation under the Qualified Foreign Institutional Investor scheme, which makes it possible for overseas companies to invest in mainland China's securities markets.

Recent reforms, which have increased foreign investor exposure to the market, include the launch of the Stock Connect scheme linking the Shanghai and Hong Kong stock exchanges. Click here to read more by WealthBriefing on suggested implications of China's financial market reforms.

“China is too big to be ignored, yet at the same time, there are very limited opportunities for foreign investors to access the market in an active way. We believe that China's transition towards more sustainable growth will benefit the Chinese equity market, which is currently trading at a discount from its peak in 2007,” said Andrea Rossi, chief executive at AXA Investment Managers.

The new strategy's stock selection process is based on a dynamic factor model with factors adjusted to the market cycle based on the qualitative macro outlook. The model seeks no more than 200 of the most attractive stocks in the CSI RAFI 400 realm.

AXA SPDB will be managed by eight portfolio managers with expertise in A-share investing and further supported by nine research analysts.