Monthly Commentary - March 31, 2023

Monthly Commentary - March 31, 2023

Market Environment

Chinese equities recovered partially during the month from February’s severe downturn. Cross-strait tensions seemed to fade, and the Chinese government showed strong support for gaming and internet sectors along with announcing state-owned enterprise (SOE) reforms and additional fiscal stimulus which combined improved local sentiment causing A-share small-cap equities and large Hong Kong-based platform companies to bounce higher. In March, large-cap platform companies within the information technology and communication services sectors lead the MSCI China Index higher with energy and consumer discretionary. Utilities, health care and real estate were the only negative performing sectors during the month.

Performance Contributors and Detractors

For the month ending March 31, 2023, China Fund, Inc. returned 0.27% while its benchmark, the MSCI China All Shares Index, returned 2.58%. From a sector perspective, the portfolio’s stock selection within consumer discretionary and allocation and stock selection within financials detracted the most from relative performance. On the other hand, allocation and stock selection within materials and information technology contributed the most to relative performance.

Turning to individual holdings, internet platform company Alibaba was the top contributor to the portfolio’s absolute performance during the month. Alibaba gained as its cheap valuation was accompanied by a return to earnings growth with losses in local consumer services, international e-commerce and digital media all narrowing.

On the other hand,—China’s leading e-Commerce platform company known for its authentic products as well as fast and efficient product delivery—was among the weakest performers. The company announced weaker-than-expected numbers in its most recent earnings and provided a conservative outlook for the first half of the year.’s announcement of additional investments it may make in order to fend off e-Commerce competition in the country also caused market worries. However, we continue to find the company’s value proposition compelling in China’s e-Commerce industry. has built a moat around product quality and logistics network, which are hard to replicate and may continue to benefit the company as the business moves into other areas, such as online pharmaceutical distribution.


China’s reopening continues to be bumpy with some sectors such as consumer discretionary and communication services (advertising) recovering ahead of others. We continue to monitor China’s property market developments as this is key in ensuring growth stability within the country. So far, a gradual, slightly better-than-expected property sector recovery has been seen on the ground. Industrial sector recovery has been weighed down by underperformance in the renewables sectors (EV/solar/wind) so far. We feel that investor sentiment has been overly bearish on concerns about slowing demand and oversupply. This continues to be a secular opportunity for growth and is key in China’s carbon neutrality transition. Platform companies in China continue to experience market sentiment volatility given varying geopolitical reactions. However, valuations are cheap, and any signs of warmer sentiment benefits a recovery in the stock prices of these platform companies more meaningfully.

Source: Brown Brothers Harriman & Co. Source for index data: MSCI

Past performance is not a guide to future returns. Investment returns are historical and do not guarantee future results. Investment returns reflect changes in net asset value and market price per share during each period and assumes that dividends and capital gains distributions, if any, were reinvested. The net asset value (NAV) percentages are not an indication of the performance of a shareholder›s investment in the Fund, which is based on market price. NAV performance includes the deduction of management fees and other expenses.


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