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View Now- Q2 saw escalating US-China tariffs (up to 145% and 125%) causing near embargo, followed by a 90-day tariff reduction to aid negotiations.
- The dispersion in sector returns was again high, with the financials and healthcare sectors posting strong returns while consumer discretionary and real estate were weakest.
- Key positive contributions came from our holdings in the financials and consumer staples sectors, offset by weakness in consumer discretionary.
The Liontrust China Fund returned -1.8%* over the quarter, compared with the -3.1% average in the IA China/Greater China sector and the -3.9% return from the MSCI China Index (both comparator benchmarks).
The second quarter began with Donald Trump’s ‘Liberation Day’ announcement of reciprocal tariffs on imports from all trading partners, although these were quickly postponed for 90 days in an effort to strike trade deals. In the case of China, tariffs on Chinese goods rose to 54% and then 145%, with China raising tariffs on US goods to 125%, leading to essentially an embargo on trade by both countries. In May both countries agreed to lower tariffs for 90 days to facilitate negotiations, with tariffs on Chinese goods falling to 30% and those on US goods to 10%.
Despite these trade tensions, Chinese equities (+7.2%) have outperformed both emerging (+5.3%) and developed (+0.1%) markets so far this year, although some of that was given back during the second quarter (-3.9%). The policy pivot towards consumption-centric fiscal stimulus announced in September 2024 is a potential game-changer. The Two Sessions prioritised boosting domestic consumption and was soon followed by the “Consumption Boosting Action Plan”. Beijing’s growth target of “around 5%” also signals clear intent to support domestic demand and provides flexibility to ease further if headwinds from US tariffs intensify. The consumer trade-in program, which has been broadened, has already had a sizeable impact of lifting household appliance and smartphone sales. Property data has weakened again after some signs of green shoots emerging, fuelling speculation that more policy support will be both required and forthcoming. The government has stepped in to address excess housing inventory more aggressively, in another sign of its commitment to stabilising the sector.
DeepSeek’s launch earlier in the year, and the success of other world-class, open-source LLMs, has reignited confidence in China’s innovation ecosystem, which has long been underestimated by global investors. The rapid pace of technological progress in China should help it overcome some of the key overhangs, such as access to US and specifically NVIDIA chips. Recent reports that Ant Group used Chinese-made semiconductors to train their state-of-the-art AI models supports the narrative that China is getting closer to becoming self-sufficient in AI.
The Liontrust China Fund returned -1.8% during the first quarter. The dispersion in sector returns was again high, with the financials (+7%) and healthcare (+5%) sectors posting strong returns while consumer discretionary (-15%) and real estate (-7%) were weakest. Key positive contributions came from our holdings in the financials and consumer staples sectors, offset by weakness in consumer discretionary.
Discrete years' performance (%) to previous quarter-end:
|
Jun-25 |
Jun-24 |
Jun-23 |
Jun-22 |
Jun-21 |
Liontrust China C Acc GBP |
21.1% |
-7.1% |
-24.2% |
-21.4% |
18.9% |
MSCI China |
23.4% |
-1.1% |
-20.5% |
-22.4% |
13.9% |
IA China/Greater China |
13.7% |
-6.2% |
-23.8% |
-17.0% |
22.3% |
Quartile |
1 |
3 |
3 |
3 |
3 |
*Source: FE Analytics, as at 30.06.25, primary share class, total return, net of fees and income reinvested.
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 can invest in derivatives. Derivatives are used to protect against currency, credit or interest rate moves or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- A financial index comprised of eligible assets that does not comply with the UCITS “5/10/40” rule is deemed not investible due to the inability of replicating the index weightings.
- The Fund’s investment objective is to target capital growth for investors. Growth stocks tend to pay out lower levels of dividend resulting in lower income yields and may produce more volatile returns than the market as a whole.
- The Fund may have both Hedged and Unhedged share classes available. The Hedged share classes use forward foreign exchange contracts to protect returns in the base currency of the Fund.
- 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.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
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.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
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.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
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.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.