China’s best-performing mutual fund of 2023 has found success in the nascent Beijing Stock Exchange, outperforming over 7,000 competitors amid a challenging market. The fund, named the ChinaAMC BJSE Innovative SME Selected 2Y Regular Open Mixed Launched Fund, focuses on stocks listed on the Beijing Stock Exchange and returned an impressive 59% in 2023, despite a slowing economy and property crisis affecting broader Chinese stocks.
The mandate of the fund requires it to invest at least 80% of its equity assets in Beijing Stock Exchange-listed stocks. According to Gu Xinfeng, a fund manager at China Asset Management Co. in Beijing, investing in the Beijing exchange is akin to sprinting on a high-speed rail. However, the swift gains and immense money inflows into the market have left many investors feeling confused.
In 2023, the fund achieved a remarkable 60% return, significantly surpassing the 15% gain of the Beijing Stock Exchange 50 Index, which tracks the most representative shares on the gauge. Meanwhile, China’s benchmark CSI 300 Index experienced an 11% decline. The majority of onshore Chinese mutual funds had negative returns last year.
The success of the Beijing exchange can be attributed to a policy package introduced in September, which allowed listed firms to transfer their listing to other exchanges and reduced trading requirements for investors. The exchange, established in 2021 as a financing channel for early-stage companies with innovative potential, presents significant growth opportunities.
Gu believes that Chinese stocks have a strong chance of rebounding this year, and the Beijing exchange is likely to amplify any potential gains. While some Beijing stocks may be overbought, Gu expects the overall upside to continue, with the Beijing Stock Exchange 50 Index possibly trending higher over the next six months.
The ChinaAMC BJSE Innovative SME Selected 2Y Regular Open Mixed Launched Fund had approximately CNY 404 million ($56 million) in assets as of September 2023. The fund operates on a unique schedule, being open for subscription and redemption only for a few days every two years. The next period for subscription and redemption is not expected until December 2025. During its open-end period, the fund follows an investment mandate that allows for a maximum of 20% allocation to Hong Kong stocks and a minimum of 5% in cash and government bonds.
In addition to managing the Beijing exchange fund, Gu has been reallocating holdings in another fund to increase exposure to Beijing-listed stocks. The success of the Beijing exchange has attracted the attention of more asset managers, prompting them to research and invest in start-ups listed on the board.
In summary, China’s best-performing fund in 2023 showcased its prowess by capitalizing on the nascent Beijing Stock Exchange. Despite challenges faced by the broader Chinese stock market, the fund’s impressive 59% return highlights the enormous potential of this volatile corner of the market. With the Beijing exchange gaining momentum and enticing more asset managers to participate, the stage is set for continued growth and opportunities in the Beijing bourse.
