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- Chinese equities outstrip both developed markets and the wider emerging market universe in Q3.
- Efforts by the US to contain Chinese AI developments has fuelled a state-backed push that given China a lead in low-cost model development
- Positive outlook, with ongoing technological innovation, government support for the property and consumer sectors, and a thawing of US trade tensions.
The Liontrust China Fund returned 19.8%* in sterling terms over the quarter, compared with the 23.9% average in the IA China/Greater China sector and the 22.9% return from the MSCI China Index (both comparator benchmarks).
Global equities saw broad-based gains during the third quarter as global tensions eased with the US striking provisional trade frameworks with, among others, the EU and Japan, while negotiations with China continued under an ongoing truce. Signs of a weaker labour market in the US allowed the Fed to cut interest rates, for the first time this year, in September. Chinese equities rose a further 22.9% (sterling terms) during the third quarter, again well ahead of both emerging (+12.6%) and developed (+9.2%) markets.
Strong returns were broad based, with all sectors rising, although materials (+53%), healthcare (+35%), communication services (+33%) and consumer discretionary (+29%) led the way. In the case of materials, China’s National Development and Reform Commission announced new targets to more than double Energy Storage System (utility scale) installations by 2027, and we also saw faster than expected solid-state battery deployment, all of which benefited battery materials companies. The gold price continued its strong run, rising by a further 17%, and the copper market tightened following the supply halt at Indonesia’s Grasberg mine, the second largest globally. For healthcare, this year has seen significant progress in the development of innovative drugs, including GLP-1s, which has led to a step-change in licensing deals with global pharma companies. Communication services and consumer discretionary sectors include China’s giant internet companies which are participating in the global AI boom. Efforts by the US to contain Chinese AI developments has fuelled a state-backed push that has reshaped China’s approach to high-tech development. These efforts have given China a lead in low-cost model development, allowing firms such as DeepSeek to significantly undercut industry pricing.
For the Fund, key positive contributions came from our holdings in the consumer staples and materials sectors, offset by the very strong performance of index heavyweights in the communications and consumer discretionary sectors. Ongoing technological innovation across sectors, continued government support for the property and consumer sectors, and a thawing of tensions in trade negotiations with the US should all support Chinese equities as we head towards 2026.
Discrete years' performance (%) to previous quarter-end:
| Sep-25 | Sep-24 | Sep-23 | Sep-22 | Sep-21 |
Liontrust China C Acc GBP | 26.4% | 7.5% | -9.2% | -24.1% | -3.4% |
MSCI China | 30.3% | 12.7% | -3.7% | -22.0% | -11.2% |
IA China/Greater China | 25.5% | 5.2% | -11.4% | -19.7% | 1.6% |
Quartile | 2 | 2 | 2 | 4 | 3 |
*Source: FE Analytics, as at 30.09.25, primary share class, total return, net of fees and income reinvested.
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KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
- Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund.
- The Fund, may in certain circumstances, invest in derivatives but it is not intended that their use will materially affect volatility. Derivatives are used to protect against currencies, credit and interest rate moves or for investment purposes. The use of derivatives may create leverage or gearing resulting in potentially greater volatility or fluctuations in the net asset value of the Fund. A relatively small movement in the value of a derivative's underlying investment may have a larger impact, positive or negative, on the value of a fund than if the underlying investment was held instead.
- Credit Counterparty Risk: outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash.
- Concentration Risk: the Fund may have a concentrated portfolio, i.e. hold a limited number of investments (35 or fewer) or have significant sector or factor exposures. If one of these investments or sectors / factors fall in value this can have a greater impact on the Fund's value than if it held a larger number of investments across a more diversified portfolio.
- Diversification Risk: the Fund is expected to invest in companies predominantly in a single country which maybe subject to greater political, social and economic risks and could result in greater volatility than investments in more broadly diversified funds.
- Emerging Markets Risk: the Fund invests in emerging markets which carries a higher risk than investment in more developed countries. This may result in higher volatility and larger drops in the value of the fund over the short term.
- Liquidity Risk: the Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
- ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
- Sanctions: certain countries, including China, have a higher risk of the imposition of financial and economic sanctions on them which may have a significant economic impact on any company operating, or based, in these countries and their ability to trade as normal. Any such sanctions may cause the value of the investments in the fund to fall significantly and may result in liquidity issues which could prevent the fund from meeting redemptions.
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It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
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