The quarter ended roughly for China during the last week of September, a further escalation of the trade conflict between China and the US, which resulted in the third imposed 10% tariff on US$ 200 billion worth of Chinese goods took effect. Like any trade war, the other part comes back with its counter measures and China introduced tariffs worth US$ 60 billion back on US goods. President Trump then got even more fierce and threatened new tarrifs on another US$ 267 billion of Chinese imports. This will then have gone full course as it would cover all goods purchased by the US from China. The two parties remain stead fast in their position so no immediate fix is expected.

Within China, there are no clear signs of significant growth acceleration domestically, and construction is heading into the slower season, especially in western & northern regions. China’s reaction to the situation has been to bolster the domestic economy through a slew of supportive policies including tax cuts, rate cuts, and fiscal spending.

While the actual extent of tax cuts is unclear at the moment, the trend for government policy is clearly tilted towards promoting innovation and domestic consumption. These have become the main drivers of Chinese economic growth.

FTSE Russell moved to include China A shares (domestically listed stocks) into its indices starting June 2019 with an initial weighting of 5.6% in its FTSE Russell Emerging Market Index. MSCI started discussions in September to further increase the weighting of China A shares in the MSCI Emerging Markets Index from 0.71% to 2.8% by August 2019 and to 3.4% by May 2020.

Domicile: Malta Source: Marco Polo Pure Asset Management, Bloomberg, APS Asset Management

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