Liontrust China Fund

Q2 2021 review

The Liontrust China Fund returned 1.1% over the second quarter, versus the IA China/Greater China which returned 4.4% and 2.1% from the MSCI China Index (both comparator benchmarks)*.


Despite some volatility, the Chinese market finished the second quarter in positive territory as the market digested inflation and regulatory concerns. Along with continued global economic recovery, we saw increased demand for raw materials this quarter. This caused some concern that higher commodity prices would impact growth and we saw a decline in the market in May. However, the Chinese government announced measures to control prices which offered relief. Data has shown that China’s recovery is still solid following the pandemic, enabling the authorities to phase out their policy stimulus and turn their attention to targeting financial risk. Regulatory concerns in the technology sector continued this quarter and potential new regulations on the education sector weighed on related stocks. Meanwhile, China’s trade data has remained strong with exports continuing to rise and the Chinese yuan strengthening against the dollar. Confidence in a strong US recovery has also grown due to optimism surrounding the successful rollout of vaccines.

The Liontrust China Fund returned 1.1% in the quarter. The real estate sector lagged due to increased government focus on a reduction in financial leverage in the sector. The education sector also faced increased regulatory scrutiny, impacting performance. However, our positions in Chinese sportswear continued to perform very strongly following a market share shift away from international brands towards domestic apparel names. An electric vehicle manufacturer also performed well after strong retail sales data and positive momentum on sales forecasts. The utilities holdings in the Fund also outperformed this quarter, with a regulatory overhang lifted from the renewables energy sector.  

This quarter, we adjusted our positioning in the materials space by selling our holding in a cement company due to a lacklustre outlook after increased constraints were placed on the property sector. We increased our position in a copper miner due to a much stronger long-term outlook for the metal owing to an increased demand outlook and limited short to medium term supply. We also sold our positions in an online autos retailer due to increased competition and after the effects of a chip shortage caused an uncertain sales outlook. Finally, we adjusted our position in the financials space by moving weight from the insurance to the banking sector due to stronger potential catalysts.

China’s vaccine drive ramped up in the second quarter with the country reaching its goal of fully vaccinating 40% of the population by the end of June. The government continues to effectively handle new outbreaks with renewed lockdowns and widespread testing. Regulatory concerns surrounding the technology space have increased, however we believe this is a short-term issue and that leading companies are likely to emerge better regulated and stronger. As outlined in the five-year plan in March, we believe China will continue to place emphasis on technological development, domestic consumer demand and the transition to cleaner energy. After a correction in March, we have a positive outlook as stocks are now trading at attractive valuations with economic growth likely to remain robust. 









Liontrust China C Acc GBP






MSCI China






IA China/Greater China













*Source: FE Analytics as at 30.06.21


**Source: FE Analytics as at 30.06.21. Quartiles generated on 07.07.21.



Key Risks




Thursday, July 29, 2021, 10:09 AM