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China Fund News Wu Juanjuan

Capital Group, a US trillion-dollar asset management giant, recently disclosed the second quarter holdings of several of its flagship funds. Data shows that many funds under Capital Group, a "major overseas Moutai investor", have increased their holdings of Kweichow Moutai. Despite the stock price correction, some long-term funds are increasing their holdings.

The maximum increase in position is 49%

As of the end of the second quarter of 2024, the latest size of the Europacific Growth Fund under the trillion-dollar asset management giant Capital Group in the United States was US$136.04 billion. Fund information disclosure materials show that as of the end of the second quarter of 2024, the fund held 5.2322 million shares of Kweichow Moutai. As of the end of the first quarter of 2024, the fund held 4.90978 million shares of Kweichow Moutai. In the second quarter, the fund increased its holdings in Kweichow Moutai.

In the second quarter, the fund held 5.2322 million shares of Kweichow Moutai

Source: Capital Group official website.

Euro Pacific Growth Fund is one of the actively managed public fund products with the largest number of Kweichow Moutai shares in the world. In addition to Euro Pacific Growth Fund, many funds under Capital Group can also be called "Moutai big households". For example, the latest scale of "American Funds-New World Fund" is US$60.375 billion. As of the end of the second quarter of 2024, the fund held 3.3089 million shares of Kweichow Moutai. As of April 30, 2024, the fund held 2.211801 million shares of Kweichow Moutai. In May and June, the fund increased its holdings of Kweichow Moutai by 49.60%.

As of the end of June 2024, mutual funds under Capital Group (public funds do not include ETFs) held a total of 10.1066 million shares of Kweichow Moutai. Among them, the three funds holding the most Kweichow Moutai are "EuroPacific Growth Fund", "New World Fund" and "Capital World Growth and Income Fund". They hold 5.232248 million shares, 3.3089 million shares and 1.2844 million shares of Kweichow Moutai respectively.

Capital Group's funds holding Kweichow Moutai

Source: Capital Group official website.

Among them, the latest size of the Capital World Growth and Income Fund is US$123.774 billion. As of the end of the second quarter, the fund held 1.2844 million shares of Kweichow Moutai.

Capital Group said in a research report in early June that some members of the investment team believe that China's stock market has experienced a correction in the past few years. This has created selective investment opportunities. From the perspective of historical price-to-earnings ratios, Chinese stocks are currently undervalued, and the government is pushing companies to increase stock buybacks and dividends. In Capital Group's international or emerging market strategies, portfolio managers tend to choose companies with strong cash flow and market dominance, including large technology giants, industrial automation representatives, and tourism-related companies.

However, there are currently large differences in the market regarding Kweichow Moutai. As the stock price adjusts, some funds withdraw. For example, since May, the proportion of Kweichow Moutai's circulating A shares held by northbound funds has declined.

The proportion of Kweichow Moutai held by northbound funds in the recent period

Source: Wind.

UBS: Valuations of liquor companies are reasonable

Recently, UBS, which has in-depth research on Chinese consumption, adjusted the ratings of some high-end liquors, attracting market attention.

UBS adjusted the ratings of some high-end Chinese liquors to neutral in the report. It predicts that the compound annual growth rate of earnings per share (EPS) of the Chinese liquor industry may slow down to 8% from 2023 to 2025. In the next 12 months, the forward price-to-earnings ratio of the Chinese liquor industry is 17 times, and the historical average price-to-earnings ratio since 2010 is 22 times, with the lowest value of 10 times during the period.

UBS further pointed out that the supply and demand of consumer goods is a key factor in determining the long-term trend of stock prices. On the supply side, during the previous rise in stock prices, some high-end liquors have accumulated a large amount of social inventory. The holding cost of some inventories is lower than the current liquor price. It is expected that by the end of 2025, the production capacity of the six major high-end liquors will expand by 37% compared with the end of 2023. In this context, if manufacturers do not control supply, it is expected that by the end of 2025, the price of high-end liquor will be under great pressure. On the one hand, inventory puts pressure on prices. On the other hand, real estate is under pressure, and residents' "wealth perception" is affected. This will affect their consumption behavior, and in turn affect their demand for liquor. ‍‍‍‍

Peng Yanyan, head of Greater China consumer goods industry at UBS, said that liquor is a beneficiary of the high-prosperity cycle. Consumption has slowed down over the past quarter. In the next two years, UBS expects the average profit growth rate of liquor companies it covers to be 8%, corresponding to a valuation of 17 times. The valuation is in a reasonable range. Therefore, UBS gave a "neutral" rating to some high-end liquors.

Giving a neutral rating to a stock means that UBS believes that the stock price may fluctuate within a certain range in the next 12 months. Peng Yanyan said that she is optimistic about soft drinks, tourism, sports, pets and other consumer segments. In addition, consumer goods companies that have successfully expanded overseas markets based on cost and industrial chain advantages are also favored.

Editor: Captain

Review: Chen Mo

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