Investors who want to get exposure to China can choose from a handful of country-specific funds. Notable actively managed open-ended funds include Gartmore China Opportunities (managed by Charlie Awdry) and Jupiter China (managed by Philip Ehrmann who previously ran the Gartmore fund). These two funds posted the top and third best performances out of all UK mutual funds in 2007.
If you want a lower-risk fund, then look to the Asia Pacific ex-Japan sector, where there are plenty of more diversified fund options.
There are also a variety of investment trusts offering different levels of exposure to China. Only one, JP Morgan Chinese, offers country-specific exposure. However, the AIC has compiled a list of 12 investment trusts that offer significant exposure to China (see table).
Investment Companies with highest exposure to China
| Fund | China (%) | HK (%) | Taiwan (%) | Total (%) | 1Y | 3Y | 5Y |
|---|---|---|---|---|---|---|---|
| JPMorgan Chinese | 42 | 30 | 26 | 98 | 90.95 | 153.75 | 210.16 |
| Henderson TR Pacific | 30 | 13 | 9 | 52 | 86.48 | 143.81 | 199.95 |
| Pacific Assets | 16 | 19 | 17 | 52 | 82.6 | 152.24 | 248.42 |
| Fidelity Asian Values | 6 | 30 | 15 | 51 | 88.16 | 149.36 | 231.03 |
| INVESCO Asia | 5 | 27 | 15 | 47 | 94.6 | 153.66 | 237.93 |
| Schroder Asia Pacific | 7 | 25 | 12 | 44 | 88.99 | 143.53 | 235.91 |
| JP Morgan Asian | 12 | 19 | 7 | 38 | 91.67 | 154.67 | 233.7 |
| Henderson Far East Income | 6 | 15 | 17 | 38 | 93.82 | 118.51 | 180.89 |
| Edinburgh Dragon | 7 | 19 | 7 | 33 | 98.94 | 147.89 | 239.83 |
| Martin Currie Pacific | 10 | 13 | 9 | 32 | 81.1 | 136.22 | 227.52 |
| Aberdeen New Dawn | 3 | 19 | 7 | 29 | 91.38 | 138.18 | 245.6 |
| Aberdeen Asian Income | 2 | 9 | 12 | 23 | 102.76 | - | - |
Figures show share price total return on £100 to 30 June 2008 (less 3.5% charges)
For more on China and Asia funds, see our fund data tool.
It is also possible to get exposure to China through low-cost exchange-traded funds (ETFs). Lyxor ETF China Enterprise tracks the Hang Seng China Enterprise Index and has 38 per cent exposure to Chinese banks.
The Lyxor ETF Hong Kong tracks the Hang Seng Index and has a 35 per cent exposure to Chinese banks.
Also, look at ETFs that track the MSCI Asia Pacific ex Japan index, which has plenty of exposure to China, such as the Lyxor ETF MSCI AC Asia Pacific ex Japan and the iShares MSCI Far East Ex-Japan.
Private client wealth manager Thurleigh Investment Managers give clients exposure to China through the iShares FTSE BRIC 50 ETF which follows the performance of the largest companies in Brazil, Russia, India and China. It has three Hong Kong companies in its top 10 holdings ("but this is mainly in Brazil").Thurleigh also puts some clients' money into the iShares MSCI Emerging Markets ETF, which aims to reflect the return on the equity markets of the world's emerging markets as represented by the MSCI Emerging Markets Index. This fund has one Hong Kong holding - China Mobile - in its top 10.
The iShares S&P Emerging Markets Infrastructure fund also has plenty of exposure to China, with four Hong Kong companies in its top 10 holdings.
For more on China ETF's, see www.lyxoretf.co.uk and www.ishares.com.
Some companies listed in London offer significant exposure to Chinese economic growth. For more on these, see our recent featureand
How much to invest
The terrible performance of the Chinese stock markets in the first half of this year, serves as a reminder that emerging markets are volatile and investors should only commit small portions of their portfolios to these countries. Five per cent seems to be the general consensus among investment advisers.
Charles MacKinnon, chief investment officer at Thurleigh Investment Managers, puts China into perspective: "Our equity exposure matches global GDP. People forget that China's GDP is only the size of the UK's. In the UK we have 4-5 per cent exposure in our growth portfolio. The Chinese economy is the size of the UK in GDP terms. But nobody would say the UK is going to be the engine of the world and pull us out of recession. People underestimate the importance of the UK and overestimate China. The US represents 50 per cent of global consumption. If that falls it doesn't help China. Getting America right is key."
