First Quarter 2019

The China Region Fund declined 16.53 percent in the first quarter of 2019, underperforming its benchmark, the Hang Seng Composite Index (HSCI), which declined 12.74 percent during the same period.  See complete fund performance.

Past performance does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.


  • From a country perspective, the China Region Fund’s allocation to the benchmark domicile of Hong Kong provided the best absolute performance for the fund in the first quarter of 2019. 
  • The top-performing sector allocations for the first quarter were to the industrials, consumer goods and properties and construction sectors.
  • Yihai International, Sinotruk Hong Kong and China Overseas Property finished out as the first quarter’s top three overall contributors to absolute gains for the fund, rising 41.53 percent, 82.60 percent and 64.63 percent respectively during that time.


  • From a country perspective, the poorest-performing allocations were smaller allocations to South Korea and Malaysia. Note also that a moderate allocation to cash added a bit of relative drag.
  • The weakest-performing sectors in the fund for the first quarter of 2019 were energy and information technology sectors.  Again, cash, if considered, constituted a drag on the fund.
  • The biggest single stock detractors within the fund were Zijin Mining, PetroChina, which rose 9.43 percent and 6.30 percent, and KunLun Energy, which fell 1.20 percent, during the three-month period.


  • Because of the potentially binary nature of certain events (U.S.-China deal/no deal, Fed hike/pause, etc.) some of our opportunities and threats remain very much related (if opposed). The U.S.-China trade war looms largest in this category at the moment, but notably and encouragingly, tariff escalation remains in “truce” mode and talks have already resulted in the indefinite rollback of the next round of U.S.-threatened tariffs (with an increasing expectation of some sort of a deal). The most recent round of talks, which again involved China’s Vice Premier Liu He and his team in Washington, has now reportedly left both sides feeling as if a “new consensus” has been reached on text for a possible agreement. The situation remains fluid (with Twitter updates and minor headlines regularly rolling in), but at the end of the day, markets may well rise on the resolution of uncertainty and a marked improvement in sentiment about the economic status quo between the world’s two largest individual economies. And indeed, as relations have improved and the trade “war” thawed to a trade “truce” amid ongoing trade “talks,” a rise is precisely what we saw in the first quarter. A more permanent resolution, however, could present a possible opportunity that may not yet be reflected in current valuations. Bear in mind that growth expectations for China in 2019 have been relatively low, as well, which leaves a possibility for upside surprises.
  • The U.S. Federal Reserve placed interest rate hikes on hold in December pending more and better data, as well as more time. The “pause” looks set to continue for at least the immediate future, as Fed officials confirmed throughout the first quarter. This continued “pause” has removed some of the weight from emerging markets’ collective shoulders, and a continued pause could, if the dollar holds or weakens, aid emerging markets (EM) further. The current nominees to the Fed do not appear hawkish in the least, and while some—including the U.S. president—are calling for rate cuts and outright quantitative easing already, there is the possibility that even a “pause” in hikes may be enough to give EM some juice. Bear in mind also that U.S. dollar strength may be driven at least in part by relative stability and the hiking cycle versus the weakness in, for example, the pound or the euro.
  • As Chinese stimulus kicks into the markets there and the trade truce remains ongoing, Chinese markets have continued to perk up from their lows last year. Some fundamental data have recently beaten expectations as well, with the latest purchasing managers’ index (PMI) data clocking in better than expected. On the services side of things, the data also beat.


  • One major threat to the recent recovery in emerging markets is the ongoing possibility of the collapse of the U.S.-China trade talks, with the resultant expiration of the current “truce” and expected subsequent implementation of hikes in tariffs as well as probable disruptions to trade in and around the region. Again, a collapse does not seem terribly likely at this point, but that being said, the situation could still turn sour quickly if something unexpected derails the talks, if the two sides remain too far apart, or if the final deal appears to be disappointing to global markets.
  • The flipside of the Fed coin mentioned earlier—and a potential threat to the nascent EM recovery—is the resumption of hikes in the U.S. Federal Reserve’s interest rates.  While this is not likely in the next quarter, particularly strong data might begin to have the market and the Fed considering a resumption as possible sooner rather than later (or never, if the last hike was the last in the cycle). Presumably (all else equal) a return to hikes in the current interest rate cycle would strengthen the U.S. dollar, perhaps weighing on EM. Some in the markets interpret and extrapolate the “pause” to mean the end of the hiking cycle necessarily, but this seems to be a speculative conclusion by some analysts and pundits and one by no means guaranteed or made explicit by the Fed. Indeed, one expects that in the face of a resilient economy or broader economic strength and/or inflation the Fed may well return to hiking, though the data would have to merit as much over some enduring time, one imagines, to convince the Fed when inflation is still lagging so much.
  • Upcoming elections in Indonesia and India are expected to extend the status quo, with Indonesia’s Joko Widodo and India’s Narenda Modi each retaining power. Their respective parties appear poised to do fine as well, but sometimes one just has to wait and see.

The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months.

The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the China Region Fund as a percentage of net assets as of 3/31/2019: Yihai International (6.22%), Sinotruk Hong Kong Ltd. (5.81%), China Overseas Property Holdings Ltd. (0.00%), Zijin Mining Group Co. Inc. (4.21%), PetroChina Co. Ltd. (4.07%), KunLun Energy Co. Inc. (2.22%).     

Net Asset Value
as of 06/18/2019

Global Resources Fund PSPFX $4.49 0.06 Gold and Precious Metals Fund USERX $7.37 0.09 World Precious Minerals Fund UNWPX $2.68 0.03 China Region Fund USCOX $8.44 0.13 Emerging Europe Fund EUROX $6.99 0.08 All American Equity Fund GBTFX $24.35 0.21 Holmes Macro Trends Fund MEGAX $16.80 0.21 Near-Term Tax Free Fund NEARX $2.21 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change