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8-K - 8-K - CHINA FUND INC | v785980_8k.htm |
Monthly Insight | |
OCT 31, 2012 | The China Fund, Inc. (CHN) |
Investment Objective
The investment objective of the Fund is to achieve long term capital appreciation. The Fund seeks to achieve its objective through investment in the equity securities of companies and other entities with significant assets, investments, production activities, trading or other business interests in China or which derive a significant part of their revenue from China.
The Fund has an operating policy that the Fund will invest at least 80% of its assets in China companies. For this purpose, 'China companies' are (i) companies for which the principal securities trading market is in China; (ii) companies for which the principal securities trading market is outside of China or in companies organized outside of China, that in both cases derive at least 50% of their revenues from goods or services sold or produced, or have at least 50% of their assets in China; or (iii) companies organized in China. Under the policy, China will mean the People's Republic of China, including Hong Kong, and Taiwan. The Fund will provide its stockholders with at least 60 days' prior notice of any change to this policy.
Performance Overview
Performance History | 1 month | 3 months | YTD | 1 Year | 3 Years (p.a.) | 5 Years (p.a.) | 10 Years (p.a.) | Since Inception | ||||||||||||||||||||||||
NAV (%) | -0.57 | 2.42 | 5.38 | -2.93 | 3.82 | -1.48 | 18.76 | 10.51 | ||||||||||||||||||||||||
Market price (%) | -1.97 | 0.74 | 6.53 | -3.02 | 2.49 | -0.62 | 19.40 | 9.45 | ||||||||||||||||||||||||
Benchmark (%) | 1.18 | 7.83 | 15.15 | 8.02 | 4.00 | -4.61 | 12.29 | N/A |
Performance History | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||||||||
NAV (%) | -24.37 | 27.25 | 72.82 | -46.95 | 86.20 | 57.10 | 6.09 | 3.80 | ||||||||||||||||||||||||
Market price (%) | -27.51 | 23.60 | 72.19 | -40.65 | 50.24 | 65.67 | -21.51 | -9.95 | ||||||||||||||||||||||||
Benchmark (%) | -18.36 | 13.60 | 67.12 | -49.37 | 37.97 | 39.50 | 10.27 | 14.27 |
Source : State Street Bank and Trust Company. Source for index data: MSCI as at October 31, 2012.
Portfolio Analysis
Source: State Street Bank and Trust Company as at October 31,2012. | * China includes A-shares (4.3%), A-share equity linked securities (9.0%), B-shares (0.9%) and H-shares (15.9%). |
The China Fund, Inc (CHN)
Portfolio Analysis (continued)
Top 10 Holdings | Sector | % | Direct Investments | Sector | % | |||||||||
CHINA BRIGHT | HEALTH CARE | 6.5 | CHINA BRIGHT | HEALTH CARE | 6.5 | |||||||||
TAIWAN SEMICONDUCTOR | I.T. | 5.6 | ZONG SU FOODS | CON. STAPLES | 0.0 | |||||||||
MANUFACTURING CO., LTD. | ||||||||||||||
HAND ENTERPRISE SOLUTIONS CO., LTD. | I.T. | 4.3 | ||||||||||||
DIGITAL CHINA HOLDINGS, LTD. | I.T. | 4.1 | ||||||||||||
INDUSTRIAL & COMMERCIAL BANK OF CHINA | FINANCIALS | 4.0 | ||||||||||||
CHINA MOBILE, LTD. | TELECOM | 3.6 | ||||||||||||
CHINA MEDICAL SYSTEM HOLDINGS, LTD. | HEALTH CARE | 3.6 | ||||||||||||
CHINA EVERBRIGHT INTERNATIONAL, LTD. | INDUSTRIALS | 3.5 | ||||||||||||
TAIWAN FAMILYMART CO., LTD. | CON. DISC. | 3.4 | ||||||||||||
SUN HUNG KAI PROPERTIES, LTD. | FINANCIALS | 3.1 | ||||||||||||
Total | 41.7 | Total | 6.5 |
Source : State Street Bank and Trust Company as at October 31, 2012.
Fund Details
NAV | $24.50 |
Market price | $21.85 |
Premium/Discount | -10.82% |
Market cap | US$396.1m |
Shares outstanding | 16,169,099 |
Exchange listed | NYSE |
Listing date | July 10, 1992 |
Benchmark | MSCI Golden Dragon Index (Total Return) |
Fund Manager | Christina Chung |
Listed and direct investment manager | RCM Asia Pacific Limited |
Source : State Street Bank and Trust Company as at October 31, 2012.
Dividend History (10 years)
Declaration date | Ex-dividend date | Record date | Payable date | Dividend/Share | Income | Long-term Capital | Short-term Capital | |||||||||||||||
8 Dec 2011 | 21 Dec 2011 | 23 Dec 2011 | 29 Dec 2011 | 2.99640 | 0.17420 | 2.82220 | 0.00000 | |||||||||||||||
8 Dec 2010 | 21 Dec 2010 | 24 Dec 2010 | 29 Dec 2010 | 2.27420 | 0.37460 | 1.89960 | 0.00000 | |||||||||||||||
9 Dec 2009 | 22 Dec 2009 | 24 Dec 2009 | 29 Dec 2009 | 0.25570 | 0.25570 | 0.00000 | 0.00000 | |||||||||||||||
8 Dec 2008 | 22 Dec 2008 | 24 Dec 2008 | 23 Jan 2009 | 5.81740 | 0.48130 | 5.33610 | 0.00000 | |||||||||||||||
7 Dec 2007 | 19 Dec 2007 | 21 Dec 2007 | 25 Jan 2008 | 12.12000 | 0.28000 | 9.00000 | 2.84000 | |||||||||||||||
8 Dec 2006 | 19 Dec 2006 | 21 Dec 2006 | 29 Dec 2006 | 4.01170 | 0.29960 | 2.73090 | 0.98120 | |||||||||||||||
9 Dec 2005 | 19 Dec 2005 | 21 Dec 2005 | 29 Dec 2005 | 2.51190 | 0.21720 | 2.29470 | 0.00000 | |||||||||||||||
13 Dec 2004 | 20 Dec 2004 | 22 Dec 2004 | 7 Jan 2005 | 3.57010 | 0.19630 | 3.26640 | 0.10740 | |||||||||||||||
19 Dec 2003 | 29 Dec 2003 | 31 Dec 2003 | 15 Jan 2004 | 1.78000 | 0.07000 | 0.67000 | 1.04000 | |||||||||||||||
17 Dec 2002 | 23 Dec 2002 | 26 Dec 2002 | 15 Jan 2003 | 0.21437 | 0.06397 | 0.00069 | 0.14971 |
Source : State Street Bank and Trust Company
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The China Fund, Inc (CHN)
The China Fund Inc. NAV Performance of USD $10,000 since inception (with dividends reinvested at NAV price)
Past performance is not a guide to future returns.
Source : State Street Bank and Trust Company as at October 31, 2012.
The China Fund, Inc. Premium/Discount
Past performance is not a guide to future returns.
Source : State Street Bank and Trust Company as at October 31, 2012.
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The China Fund, Inc (CHN)
Manager’s Commentary
Market review
In October, equity market investors became more active as market sentiment was boosted by positive economic data. The 18th Party Congress dates were finalized and indications of an orderly transition of power helped alleviate political concerns. High beta stocks outperformed the market in the month of October. We have seen fund inflows into the Hong Kong market leading to intervention by the Hong Kong Monetary Authority to ease appreciation pressure on the Hong Kong Dollar. The Renminbi was also under pressure to appreciate. Latest economic data reinforced expectations that the China economy bottomed out in the third quarter of 2012. Meanwhile, Chinese banks also released better than expected third quarter earnings results driven in particular by relatively steady net interest margins and stable non-performing loans. The A-shares market also showed signs of stabilization on the back of encouraging macroeconomic data.
The Taiwan market was one of the worst performing markets in Asia Pacific during October. Market sentiment was cautious on the back of lackluster corporate earnings and conservative forward earning guidance in the third quarter of 2012. Most technology firms gave cautious outlooks for the fourth quarter of 2012 during this traditional low season. The main underperforming sectors include electric appliances, plastics and chemicals. On the positive front, September exports unexpectedly rose 10.4% year-on-year, surprising the market on the upside.
Fund review
In October, the Fund underperformed relative to the benchmark mainly as a result of stock selection in the financial sector. Our underweighting in financials also hurt the Fund's performance.
The main detractors during the month were Epistar and Ruentex Development. The share price weakness of Epistar was mainly due to the weak third quarter 2012 earnings result. The gross margin of the business is deteriorating. On the other hand, there was no material news flow for Ruentex Development. The share price consolidated after the strong performance year to date.
Outlook
With the change of political leadership in China, the market is likely to discount the potential of policy reform over the next twelve months. Coupling this with the China economy bottoming out, we would expect China equities to recover over the next six months driven partly by liquidity inflows. Hence, we reduced our cash position and added selectively to large cap stocks.
The Taiwan market underperformed the regional market in October. Recent data suggested that export growth revived in September after a period of softness. However, the rebound was mainly driven by chemical exports, while IT exports remained lackluster. We believe that a recovery of the Taiwan economy, if any, will be largely driven by an upswing in exports to China; while domestic sectors would remain relatively weak. We expect the Taiwan IT sector to remain under pressure in the near to medium term, especially given a weak PC cycle heading into 2013. However, we do see selective opportunities in this sector which can benefit from rising 3G penetration in emerging markets and the increasing popularity of low end smartphones.
Source : RCM Asia Pacific Limited as at October 31, 2012.
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The China Fund, Inc (CHN)
Portfolio Holdings
Percentage of | ||||||||||||||||||
CUSIP | Security Description | Cost Base | Base MV | Shares | Net Assets | |||||||||||||
ACI007Y93 | China Bright | 14,969,436.00 | 25,868,089.00 | 14,665,617 | 6.5 | |||||||||||||
688910900 | Taiwan Semiconductor Manufacturing Co., Ltd. | 19,343,474.00 | 22,183,730.00 | 7,306,000 | 5.6 | |||||||||||||
B3VN92906 | HAND Enterprise Solutions Co., Ltd. | 1,793,494.00 | 17,003,744.00 | 6,369,715 | 4.3 | |||||||||||||
635186901 | Digital China Holdings, Ltd. | 17,914,700.00 | 16,132,936.00 | 9,603,000 | 4.1 | |||||||||||||
B1G1QD902 | Industrial & Commercial Bank of China | 16,724,848.00 | 15,712,923.00 | 23,738,000 | 4.0 | |||||||||||||
607355906 | China Mobile, Ltd. | 13,583,976.00 | 14,165,096.00 | 1,278,000 | 3.6 | |||||||||||||
B6WY99909 | China Medical System Holdings, Ltd. | 1,791,777.00 | 14,156,304.00 | 24,489,300 | 3.6 | |||||||||||||
663094902 | China Everbright International, Ltd. | 12,183,629.00 | 13,761,550.00 | 26,730,000 | 3.5 | |||||||||||||
644094906 | Taiwan FamilyMart Co., Ltd. | 3,186,102.00 | 13,583,111.00 | 2,854,652 | 3.4 | |||||||||||||
685992000 | Sun Hung Kai Properties, Ltd. | 11,681,518.00 | 12,488,474.00 | 897,000 | 3.1 | |||||||||||||
B00G0S903 | CNOOC, Ltd. | 11,883,847.00 | 11,509,056.00 | 5,547,000 | 2.9 | |||||||||||||
633393905 | Enn Energy Holdings, Ltd. | 744,584.00 | 11,152,186.00 | 2,680,000 | 2.8 | |||||||||||||
B3ZVDV905 | Sinopharm Group Co., Ltd. | 6,363,867.00 | 10,276,935.00 | 3,051,600 | 2.6 | |||||||||||||
99ZMCS903 | Kweichow Moutai Co., Ltd. | 8,981,307.00 | 9,879,508.00 | 251,649 | 2.5 | |||||||||||||
B2R2ZC908 | CSR Corp., Ltd. | 9,248,041.00 | 9,501,663.00 | 12,212,000 | 2.4 | |||||||||||||
670039007 | Uni-President Enterprises Corp. | 1,609,768.00 | 9,346,746.00 | 5,291,508 | 2.4 | |||||||||||||
629099904 | WT Microelectronics Co., Ltd. | 8,888,528.00 | 8,876,713.00 | 7,335,530 | 2.2 | |||||||||||||
913BMZ902 | Ping An Insurance (Group) Company of China, Ltd. | 9,494,980.00 | 8,733,043.00 | 1,418,047 | 2.2 | |||||||||||||
B01CT3905 | Tencent Holdings, Ltd. | 6,391,568.00 | 8,298,181.00 | 234,200 | 2.1 | |||||||||||||
619376908 | China Resources Land, Ltd. | 5,946,869.00 | 7,856,197.00 | 3,436,000 | 2.0 | |||||||||||||
17307D352 | Wuliangye Yibin Co., Ltd. | 3,118,592.00 | 7,484,903.00 | 1,403,507 | 1.9 | |||||||||||||
674842901 | Ruentex Development Co., Ltd. | 3,423,335.00 | 7,407,745.00 | 4,416,301 | 1.9 | |||||||||||||
634007900 | Kunlun Energy Co., Ltd. | 6,300,267.00 | 7,257,553.00 | 3,906,000 | 1.8 | |||||||||||||
17313A533 | Gree Electric Appliances, Inc. | 6,453,442.00 | 6,738,271.00 | 1,838,546 | 1.7 | |||||||||||||
B1YMYT902 | Hiwin Technologies Corp. | 9,693,067.00 | 6,067,163.00 | 942,750 | 1.5 | |||||||||||||
643648900 | Shenzhen International Holdings, Ltd. | 4,383,169.00 | 6,003,445.00 | 71,580,000 | 1.5 | |||||||||||||
671815900 | Qingling Motors Co., Ltd. | 7,603,281.00 | 5,992,648.00 | 24,836,000 | 1.5 | |||||||||||||
34415V109 | Focus Media Holding, Ltd. | 5,976,531.00 | 5,905,305.00 | 250,437 | 1.5 | |||||||||||||
626073902 | Delta Electronics Inc. | 4,550,608.00 | 5,517,399.00 | 1,615,000 | 1.4 | |||||||||||||
B1JNK8908 | China Coal Energy Co., Ltd. | 6,860,736.00 | 5,268,632.00 | 5,296,000 | 1.3 | |||||||||||||
959GRNII9 | Taiwan Life Insurance Co., Ltd. | 6,178,274.00 | 4,939,075.00 | 200,000,000 | 1.3 | |||||||||||||
651795908 | Natural Beauty Bio-Technology, Ltd. | 4,906,910.00 | 4,801,750.00 | 47,710,000 | 1.2 | |||||||||||||
600245005 | ASM Pacific Technology, Ltd. | 5,467,670.00 | 4,578,613.00 | 410,700 | 1.2 | |||||||||||||
644806002 | Hutchison Whampoa, Ltd. | 4,088,916.00 | 4,462,752.00 | 453,000 | 1.1 | |||||||||||||
620267906 | Advantech Co., Ltd. | 4,104,779.00 | 4,439,332.00 | 1,284,000 | 1.1 | |||||||||||||
665157905 | Comba Telecom Systems Holdings, Ltd. | 7,565,579.00 | 4,284,393.00 | 10,958,500 | 1.1 | |||||||||||||
626735906 | Hong Kong Exchanges and Clearing, Ltd. | 4,018,117.00 | 4,233,000.00 | 257,100 | 1.1 | |||||||||||||
643055908 | Golden Meditech Co., Ltd. | 4,555,715.00 | 4,159,560.00 | 35,040,000 | 1.0 | |||||||||||||
604364901 | Yantai Changyu Pioneer Wine Co., Ltd. | 5,808,831.00 | 3,492,255.00 | 688,856 | 0.9 | |||||||||||||
B633D9904 | Zhongsheng Group Holdings, Ltd. | 3,466,065.00 | 3,441,686.00 | 2,662,000 | 0.9 | |||||||||||||
B1CKXF901 | Zhengzhou Yutong Bus Co., Ltd. | 3,096,799.00 | 2,793,387.00 | 825,469 | 0.7 | |||||||||||||
637248907 | MediaTek Inc. | 2,464,368.00 | 2,466,033.00 | 222,000 | 0.6 | |||||||||||||
B4PTR3906 | Fook Woo Group Holdings, Ltd. | 7,974,083.00 | 2,237,416.00 | 25,314,000 | 0.5 | |||||||||||||
B05LP6908 | CDW Holding, Ltd. | 836,561.00 | 2,168,946.00 | 28,454,000 | 0.5 | |||||||||||||
635415904 | Epistar Corp. | 2,925,773.00 | 1,875,122.00 | 1,178,000 | 0.5 | |||||||||||||
631349909 | Chaoda Modern Agriculture (Holdings), Ltd. | 9,287,936.00 | 0.00 | 26,651,357 | 0.0 | |||||||||||||
B04W2V905 | FU JI Food & Catering Services | 4,246,696.00 | 0.00 | 5,462,000 | 0.0 | |||||||||||||
ACI0090H8 | Zong Su Foods | 15,000,034.00 | 0.00 | 2,677 | 0.0 |
Source : State Street Bank and Trust Company as at October 31, 2012.
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The China Fund, Inc (CHN)
The information contained herein has been obtained from sources believed to be reliable but RCM and its affiliates do not warrant the information to be accurate, complete or reliable. The opinions expressed herein are subject to change at any time and without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information is contained in the fund's annual and semiannual reports, proxy statement and other fund information, which may be obtained by contacting your financial advisor or visiting the fund's website at www. chinafundinc.com. This information is unaudited and is intended for informational purposes only. It is presented only to provide information on investment strategies and opportunities. The Fund seeks to achieve its objective through investment in the equity securities of companies and other entities with significant assets, investments, production activities, trading or other business interests in China or which derive a significant part of their revenue from China. Investing in non-U.S. securities entails additional risks, including political and economic risk and the risk of currency fluctuations, as well as lower liquidity. These risks, which can result in greater price volatility, will generally be enhanced in less diversified funds that concentrate investments in a particular geographic region. The Fund is a closed-end exchange traded management investment company. This material is presented only to provide information and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares are sold on the open market through a stock exchange, where shares may trade at a premium or a discount. Holdings are subject to change daily.