Half-year Report: Company Announcement
In the first half of the financial year ending 31st March 2025, the company delivered a net asset value (NAV) total return of +4.2% in sterling terms, compared with +10.4% for the MSCI China Index, the benchmark. The share price return was +9.4%, with the discount narrowing from a previous year-end of -13.1% to -9.1%.
Over a ten-year span ending 31st March 2025, the NAV total return was +60.9%, outperforming the benchmark’s return of +53.4%. The share price return stood at +67.9%.
To sustain shareholder confidence, a fourth interim dividend of 2.73p is declared on 1st July 2025. This will bring the annual dividend for the year ending 30th September 2025 to 10.92p.
Chairman Alexandra Mackesy remarked on the company’s short-term performance: “Although the short-term results are below the benchmark, the rise of the MSCI China Index was largely driven by value stocks, especially state-controlled financial entities. Our focus remains on the long-term growth prospects of quality companies. Over the long term, we’ve achieved positive absolute returns, surpassing the benchmark over a decade.”
Portfolio Managers Rebecca Jiang, Howard Wang, and Li Tan shared their insights: “The recent geopolitical developments, particularly the US administration’s tariff policies, have heightened China-US tensions. Yet, we are optimistic about the Chinese economy, equities, and our portfolio. We have adjusted our portfolio to mirror new realities, focusing on domestic businesses and exporters with strong pricing power and diversified chains.”
During the six months concluding on 31st March 2025, Greater China stock markets experienced volatility. Despite excitement over China’s artificial intelligence platform DeepSeek, the company faced significant setbacks later in the period. As the US administration released contradictory statements concerning import tariffs, global markets, including the company’s, slipped. For this period, the company’s net asset return rose by +4.2%, behind the MSCI China Index’s +10.4%. The share price return was +9.4% with a discount reduction from -13.1% to -9.1%.
On investment strategies, the board has empowered the Portfolio Managers to manage gearing within a range of 10% net cash to 20% geared, reflecting increased confidence in Chinese markets. As of now, £3.9 million is drawn from the £30.0 million loan facility expiring in July 2025.
Regarding the Company’s dividend policy, regular quarterly dividends equivalent to 4% of the Company’s NAV are planned. These are distributed on the first business day in December, March, June, and September.
The share capital stands at 83,202,465 Ordinary shares, including shares held in Treasury. There were no new shares issued or repurchased during the reporting period. However, 93,699 shares have been bought back since the period ended.
Strategic Appointments and Outlook
A key appointment was made, with Mr. Nick Bannerman joining the Board as of 24th January 2025. His experience will further strengthen the Board.
Looking to the future, CEO Mackesy highlighted an optimistic stance despite global uncertainties, noting the potential of Chinese markets, especially in technology-driven sectors, and the opportunities available for patient investors.
Market Performance and Strategic Adjustments
China’s economy is benefiting from recent policy pivots towards growth. Fiscal and monetary policies introduced have driven domestic economic recovery. The launch of DeepSeek’s advanced AI technology is a testament to China’s ability to make significant advancements independently. This, coupled with President Xi’s meetings with key industry players, has fostered increased confidence.
Despite the housing market downturn, policy interventions have somewhat stabilized the sector. Chinese banks, though facing narrow profit margins, have maintained stability.
At the corporate level, the portfolio has gained from IT and industrial sectors, with notable growth from businesses like Kingdee and Alibaba, driven by innovations in AI. The consumer sector also showed promise with companies like Guming and Bloks delivering returns. However, challenges remain in sectors like EVs and semiconductors given external pressures and market competition.
With ongoing structural reforms, particularly in corporate governance and shareholder returns, and a pro-entrepreneur stance, the long-term trajectory for Chinese equities appears to be constructive.
The company acknowledges past missteps and is committed to refining investment strategies and increasing exposure in rapidly evolving sectors such as semiconductors, software, and robotics. The focus remains on capitalizing on unique growth opportunities to maintain the company’s outstanding long-term performance.
Looking ahead, geopolitical tensions, particularly between China and the US, present challenges. Still, China’s economic resilience, regulatory support, policy boosts to domestic consumption, and the strategic pivot to technology-driven growth provide grounds for cautious optimism.
