Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Rebecca Jiang. She is Manager of the JPMorgan China Growth & Income Trust. Hello.
Rebecca Jiang: Good morning, Holly.
Black: So, it wasn't a great start to the year for China focused funds in 2020, but things really picked up and your trust performed particularly well. So, what went right for you?
Jiang: I think, you know, Covid while clearly was unexpected, has actually accelerated and magnified a lot of the existing trends in China. So, a couple of things, first of all, increased investments into the healthcare system and increasing public health awareness. Secondly, you know, the digitisation of people's life, not only to consumers, but also to corporates as well. And lastly, a key trend of import substitution, and the stronger gets stronger. So overall, you know, the Trust has been pre-positioned for a lot of those trends. And we continue to find new ideas along those lines.
Black: And do you think those themes will continue through 2021 or you're looking at different areas now.
Jiang: I think some of those are clearly structural. So, for example, take public health awareness as an example. You know, you're probably not aware that the flu vaccination in China is extremely low, was extremely low at 5%. But this winter season, this flu season, has seen, you know, rising awareness, people's awareness, and increasing willingness to get vaccinated. And we believe that this, these things are structural, and it's going to stay for a long period of time. You know, other things like import substitution, for example. A lot of the local companies took the advantage of less supply chain disruption and has gained market share from multinational companies. And those are some of the trends that we believe will continue. Clearly, valuation has been quite different now versus 12 months ago, which is another thing that we need to take into consideration. But, you know, we do believe that a lot of the structural trends basically pre-existed before Covid and will continue to exist afterwards.
Black: And are there any headwinds on the horizon or areas where you're feeling more cautious?
Jiang: I think when investing in China, investors – one thing that investors should keep at the back of their mind is that the China equity stock market is really young. You know, we're talking about 30 years of history, it was only open to foreign investors in the last five years. So, the companies are less mature and so are the market participants. So naturally, there are a lot of volatilities, there will be a lot of volatilities involved. And, we do feel that, from a longer-term perspective, the market valuation still looks to long term investors, but certainly some part of market clearly has gotten more expensive. So, it is our view that for investors who want to get exposure to China, probably the best way is through active managers who can pick the right stock, and probably more importantly, use the market volatility as their friend.
Black: And I can't let you go without asking you what is the outlook from the China perspective with the incoming US President Joe Biden?
Jiang: I think I probably won't be able to speak on the Chinese people's behalf. But it seems that the consensus within China is that China-US decoupling would be a long-term trend, or at least will last for a prolonged period of time. So, the domestic policies emphasis has been pretty much now switched to boosting internal consumption, as well as increasing self-sufficiencies, particularly in key sectors like technology.
Black: Rebecca, thank you so much for your time. From Morningstar, I'm Holly Black.
