“The worst is now behind China, even if the property market might take longer than expected to recover significantly,” Sun told this news service in an exclusive interview.

In 2024, the International Monetary Fund recently upgraded China’s growth forecast to 5 per cent from 4.6 per cent, after a strong first quarter, and to 4.5 per cent in 2025, attributable to additional policy measures. China announced a number of initiatives to support the housing market in May, but China’s property woes remain a concern, with some analysts saying that the measures fall short of what is required for a sustainable recovery.  

Trade tensions
Despite fears over geopolitical conflicts, Sun said that a number of Chinese firms have learnt from the 2018 US/China trade conflict when former US President Donald Trump set tariffs and other trade barriers on China. “They have moved their capacities to south-east Asia, Mexico and Europe, to avoid the high tariffs and to mitigate the impact,” Sun said.

After Brussels recently imposed additional tariffs on electric cars shipped from China, Sun thinks the impact on Chinese electric vehicle makers will be manageable because the anti-subsidy investigation – started in September 2023 – and the main headwind impact is already priced in the share price. “Meanwhile, many Chinese electric vehicle makers have already accelerated their localisation strategy which, in the longer term, will further mitigate the tariff or other trade conflict risks,” she added. See here for more commentary.

Nevertheless, Sun avoids investing in firms that could be potentially impacted by the trade tensions, focusing on those that can’t be easily replaced. She thinks there are a lot of investment opportunities in China, with many firms currently being undervalued. “Now, is a good time to invest,” she said.

China A Shares Fund
Sun manages the SMD-AM Luxembourg-listed China A Shares Fund. The strategy aims to achieve long-term capital growth by investing in Chinese companies listed on the Shanghai and Shenzhen stock exchanges. It uses a bottom-up, research-driven approach to identify quality companies with attractive valuations from sectors that are likely to benefit from the changing growth dynamics in the Chinese economy. It also promotes environmental and social characteristics, in compliance with Article 8 of the Sustainable Finance Disclosure Regulation (SFDR); it has outperformed the index this year.

It rose during the first half of the month when the Chinese government announced measures to ease restrictions on home purchases in major cities, and the People's Bank of China said it would provide funds to clear excess housing inventory. However, after the climb, the market softened towards the end of the month as geopolitical risks around Taiwan increased and many investors sold their holdings to take profits. Also, the stock market ended the month with a small decline. In terms of sectors, the energy and utilities sectors performed well, while the healthcare and telecommunication services sectors were weak.

The fund invests heavily in consumer staples, IT, and industrials. Sun said it is overweight in the tech sector after the government supported industry in the wake of the 2018 US/China trade conflict.

Top 10 holdings include Kweichow Moutai and Luzhou Lao Jiao, which specialise in Maotai liqueur and Baijiu liqueur respectively, and Shanghai Friendess, which specialises in supplying laser cutting equipment manufacturers with automation products focused on laser cutting control systems. Another top 10 holding is China Telecom and ZTE Corp, a telecom equipment vendor. The fund also includes Jiangsu Yoke, a semi-conductor material supplier.

Sumitomo Mitsui DS Asset Management – headquartered in Tokyo – is a large investment manager with over $127 billion assets under management. It has branches in London, New York, Hong Kong, Shanghai and Singapore.