abrdn has launched a ‘next generation’ fund in China, investing in a greener and low carbon world.
The product will be focused on small- and mid-cap companies (SMIDs) in the bottom 30% of the Chinese equity market both on- and offshore.
Managed by the China equities team, led by Nicholas Yeo, it will provide investors with access to opportunities in the Shanghai Star Market, tilting the 30-60 holdings in the portfolio towards innovation. It will focus on the following themes:
Green – policymakers globally are committing to a greener and lower carbon world. China dominates the green tech ecosystem with over 90% of global solar production capacity and 75% of battery. Holdings in the fund will include EV charging station makers.
Aspiration – rising affluence is leading to fast growth in premium consumption in areas including cosmetics and luxury car dealerships. It is thought that between 2020-2030, the number of households in China with annual incomes above USD22k is expected to grow by 70%.
Health – rising disposable incomes are driving demand for healthcare products and services. The median age in China is 38, and this is set to rise to 46 by 2050. The demographic problem and rising wealth mean healthcare is set to benefit. We see big opportunities in high quality healthcare service providers focused on clinical research and quality control.
Technology – China currently imports over $300bn of semi-conductors each year. Technology self-reliance is a key focus for policymakers in China and this represents a huge opportunity for investors. On-shoring of technology and import substitution are also strong trends in areas of automation and robotics.
Yeo commented: “SMIDs are the economic backbone of China, offering attractive valuations and significant alpha potential. They hold lower regulatory risk as attention and scrutiny has mainly been focused on large companies.
“Smaller companies, meanwhile, are benefitting from policy support aimed at promoting more competition and innovation. Furthermore, coverage of SMIDs by brokers tends to be relatively thin, providing an information edge for active investors who carry out their own due diligence and research – it’s an exciting time to open up these diverse opportunities to investors. abrdn is proud to be one the first asset managers to have developed a dedicated China SMID capability.”
The fund is domiciled in Luxembourg and is available to investors across UK, Europe and Asia.
