The new indices select the top-ranked companies in each market based on the index provider’s proprietary fundamental scoring methodology that emphasizes growth at reasonable valuations. Companies of all market capitalizations are eligible for inclusion in each index. Additionally, the new index for GLCN broadens the universe of Chinese companies eligible for inclusion from the fund’s current index. The new index that GLCN will seek to track includes locally listed China A-shares, as well as Chinese companies listed on eligible stock exchanges as determined by the index provider, allowing investors to access leading growth companies from the full China opportunity set.
“While some strategists are cautious about fundamentals and other risks, investor momentum, strong economic data, and supportive policies could give the rally, especially in domestic A-share stocks, further legs, at least for a bit,” reports Reshma Kapadia for Barron’s.
Going With GLCN
Perhaps surprisingly, China is one of the best-performing equity markets in the world this year, indicating Beijing’s efforts to not allow the world’s second-largest economy to flail against the coronavirus backdrop are paying off.
“China’s plans to let domestic commercial banks get securities licenses just as Beijing opens its financial markets to foreign banks. The move bolstered shares of domestically listed brokerage firms,” according to Barron’s.
For instance, China’s official manufacturing purchasing managers index rose to a three-month high of 50.9 in June from 50.6 in May. Meanwhile, the separate nonmanufacturing PMI, a gauge of services and construction activity, advanced to a seven-month high of 54.4 from 53.6 in May. Both indices have locked in four consecutive months of readings above 50, which indicates an expansion in the sector.
“Although China’s economy will grow at a far slower 3% level, Michelle Qi, Chief Investment Officer of Eastspring Investments, Prudential’s Asian asset manager, says many of the structural trends in place have not been derailed—including higher health consciousness and health-care affordability, shifting demographics, higher domestic consumption, and technological innovation,” reports Barron’s.
GLCN allocates about 31% of its total weight to the grow of its consumer discretionary, technology, and communication services sectors.