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JH Explorer in China: Change brings opportunities

Portfolio Manager Richard Clode discusses the key takeaways from his first China trip in four years.

Richard Clode, CFA

Richard Clode, CFA

Portfolio Manager


26 Jul 2023
2 minute watch

Key takeaways:

  • After many years of being the manufacturing powerhouse to the world, China is aiming to become more self-reliant, by localising its supply chains.
  • Semiconductors, electric vehicle and renewal energy are among the sectors being boosted by government initiatives towards China’s massive decarbonisation programme.
  • The Global Technology Leaders Team continues to closely monitor these trends, and the resulting risks and opportunities.
The JH Explorer series follows our investment teams across the globe and shares their on-the-ground research at a country and company level.

 

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IMPORTANT INFORMATION

Technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. A concentrated investment in a single industry could be more volatile than the performance of less concentrated investments and the market.

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As you can see I’m in China currently, and given this is my first trip after four years of enforced absence, I suppose my key takeaway was that, I’m very much feeling that effect of deglobalisation. I’ve been coming to China for the last 20 years, and certainly felt over that time that China has become more international, more open to the west, and to the world since the entry to WTO [World Trade Organization] a long time ago. And I felt that was just reversing from this trip, you know we’ve always seen China as the manufacturing sort of powerhouse of the world and everyone coming here to manufacture. But now the focus seems here to be manufacturing for themselves and very much localising supply chains, being more self-reliant.

So I spent a lot of this week meeting a lot of semiconductor companies that were feeding chips into what is the largest EV [electric vehicle] market here, in China in the world, so that EV brand in China which is taking share of that market you know wants to source their key components and chips and batteries, from local suppliers in China and we’re seeing huge government support from companies feeding into that I was going into a lot of shiny new offices with a lot of capital being provided by local governments, central governments, by local capital markets to build an awful lot of capacity to support you know the key twin prongs of EVs and renewal energy here. Not leaving too much room for some of those international players that are having to respond to that by either looking to bring manufacturing or some of their fabs [foundries] closer to China or within China.

So that for me was a big change to what we’ve seen in the past. We have seen that with smartphones, the Chinese internet sector as well. And we know that will create a lot of risk but also a lot of opportunity here within China, so we very much want to keep on top of those trends and look for those best opportunities to invest in over time.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

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Important information

Please read the following important information regarding funds related to this article.

The Janus Henderson Horizon Fund (the “Fund”) is a Luxembourg SICAV incorporated on 30 May 1985, managed by Janus Henderson Investors Europe S.A. Janus Henderson Investors Europe S.A. may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation. This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions.
    Specific risks
  • Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund is focused towards particular industries or investment themes and may be heavily impacted by factors such as changes in government regulation, increased price competition, technological advancements and other adverse events.
  • The Fund follows a sustainable investment approach, which may cause it to be overweight and/or underweight in certain sectors and thus perform differently than funds that have a similar objective but which do not integrate sustainable investment criteria when selecting securities.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund holds assets in currencies other than the base currency of the Fund, or you invest in a share/unit class of a different currency to the Fund (unless hedged, i.e. mitigated by taking an offsetting position in a related security), the value of your investment may be impacted by changes in exchange rates.
  • When the Fund, or a share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency (hedge), the hedging strategy itself may positively or negatively impact the value of the Fund due to differences in short-term interest rates between the currencies.
  • Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
  • The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
The Janus Henderson Horizon Fund (the “Fund”) is a Luxembourg SICAV incorporated on 30 May 1985, managed by Janus Henderson Investors Europe S.A. Janus Henderson Investors Europe S.A. may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation. This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions.
    Specific risks
  • Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund is focused towards particular industries or investment themes and may be heavily impacted by factors such as changes in government regulation, increased price competition, technological advancements and other adverse events.
  • This Fund may have a particularly concentrated portfolio relative to its investment universe or other funds in its sector. An adverse event impacting even a small number of holdings could create significant volatility or losses for the Fund.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund holds assets in currencies other than the base currency of the Fund, or you invest in a share/unit class of a different currency to the Fund (unless hedged, i.e. mitigated by taking an offsetting position in a related security), the value of your investment may be impacted by changes in exchange rates.
  • When the Fund, or a share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency (hedge), the hedging strategy itself may positively or negatively impact the value of the Fund due to differences in short-term interest rates between the currencies.
  • Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
  • The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
Richard Clode, CFA

Richard Clode, CFA

Portfolio Manager


26 Jul 2023
2 minute watch

Key takeaways:

  • After many years of being the manufacturing powerhouse to the world, China is aiming to become more self-reliant, by localising its supply chains.
  • Semiconductors, electric vehicle and renewal energy are among the sectors being boosted by government initiatives towards China’s massive decarbonisation programme.
  • The Global Technology Leaders Team continues to closely monitor these trends, and the resulting risks and opportunities.