In the fourth quarter, we saw an acceleration of foreign capital inflows along with the return of Chinese capital back into the stock market. This was helped by a combination of further capital market reforms and the easing of tensions in the China-US relationship resulting in a back to business attitude.
The quarter may have been the start of a new bull market in China. Going forward, with a combination of expected profit growth rate recovery, aggressive policies to support the New Economy, Capital market reforms resulting in the likely more domestic and foreign capital flows in the local markets which should bode well for the A share market that the Fund is focused on.
After ten years of growth, many Internet companies saw substantial slowdown for the year given a mature Internet population of 800 million users, well over half the population. A weaker economy and in a time where web companies relying on advertising revenue faced stiff competition.
As we have discussed before, China is transitioning from the legacy economy of being the production capital of the world towards more and more service economy and more research and development. China has come to an inflection point where the New Economy is now taking a prominent role in GDP contribution.