Q1 2018 Commentary – Mackenzie All China Equity Fund | Mackenzie Investments

Fund Commentary

Q1 2018 Commentary

Mackenzie All China Equity Fund


Performance Summary

  • Fund performance is not available for funds with a history of less than one year.

Market Review

  • Economic data for the A-share market slightly exceeded expectation in the first quarter. The March PMI hit 51.5%, 1.2% higher than February, also the second highest reading since 2013. Growth of property sales slowed down in March compared to the extremely high rate last year. However, the trend in Q1 was flat and the data exceeded expectations.
  • The central bank continued a relatively tight monetary policy this quarter. Growth of M2 was 8.6% and 8.8% for January and February, respectively. CPI was 2% for the first quarter.
  • In the latter part of Q1 2018, the Hong Kong market slowed down after rallying in January.  Concerns about U.S. inflation and U.S.-China trade wars triggered market declines in February and March. Market volatility has increased since February 2018.

Outlook

  • In March, the China-US tariff friction has led to lots of market. However, we think the possibility of a major trade war is low. We expect China to open more sectors for US investment and business; banking and insurance sectors may be the first ones on the list. We remain relatively confident on economic growth for the rest of the year.
  • Some larger capitalization companies may experience a pull back this year as they have gone up significantly in the previous year. Given these circumstances, we will adjust the portfolio structure into a more diverse and balanced one.
  • While our major holdings are in sectors including Consumer, Insurance, Health Care, and Manufacturing, we may consider stocks in other sectors, including Technology, Media, and Telecommunications (TMT). The government is emphasizing the importance of new technologies and high growth sectors this year, and may bring tech and internet giants to A Share market via CDR.
  • ChiNext significantly outperformed MSCI A Share index in the first quarter due to the tech fever in the market. However, our analysis shows that many ChiNext Companies’ high earnings growth are mostly from M&A or due to low earnings growth in the past. Therefore, we believe the momentum of these stocks won’t last. We will consider quality companies in the TMT sectors with reasonable valuations and visible earning growth.

Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing.

This document includes forward-looking information that is based on forecasts of future events as of March 31, 2018. Mackenzie Financial Corporation will not necessarily update the information to reflect changes after that date. Forward-looking statements are not guarantees of future performance and risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Some of these risks are changes to or volatility in the economy, politics, securities markets, interest rates, currency exchange rates, business competition, capital markets, technology, laws, or when catastrophic events occur. Do not place undue reliance on forward-looking information. In addition, any statement about companies is not an endorsement or recommendation to buy or sell any security.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.