David Gait, manager of Pacific Assets Trust (PAC), has invested in Weifu High-Technology Group which he says is is well placed to benefit from a shift towards tighter vehicle emissions in China.
"Over the half year to 31 July 2013, we held one on one meetings with the senior management of over 500 Asian companies, each of which are potential candidates for investment. However, our long-term investment horizon and conviction in the trust's current investments meant that the portfolio itself remains substantially unchanged over the six months under review. But a new position was initiated in Weifu High-Technology Group, the leading manufacturer of fuel injection systems for the automotive sector in China.
"The company is well placed to contribute to, and benefit from, a shift towards tighter vehicle emissions standards in China. The company has also benefited from a long-term partnership with the highly regarded Bosch Group, dating back over 20 years.
"Weifu High-Technology Group aside, we continue to struggle to generate many new investment ideas in China. There are three main reasons for this. Firstly, corporate governance and management quality remain a challenge. Second, even where we are comfortable with management, we often struggle to get comfortable with long-term political alignment. So few Chinese companies are in charge of their own destiny."
Pacific Assets Trust had less than 4 per cent of its assets in China at the end of August, but has 9.4 per cent in Hong Kong, including its largest holding Towngas China which accounts for 5.3 per cent of assets.
Weifu High-Technology Group's products include catalytic converters and diesel fuel injection products for loading trucks, cars and construction machines. It has become the biggest manufacturer of fuel injection systems for automotive engines in China, but also exports to the US, south east Asia and the Middle East.
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