Second Quarter 2020

The China Region Fund gained 12.90 percent in the second quarter of 2020, outperforming its benchmark, the Hang Seng Composite, which gained 9.31 percent. See complete fund performance here.

The fund outperformed its index by 360 basis points mostly due to strong stock selection in Hong Kong. The strategy to underweight the financial sector and overweight food retailers benefited the fund the most.

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.


  • On the country level, the fund’s superior stock selection in Hong Kong had the most positive effect on the fund’s performance relative to its index. In particular, its allocation in the food industry was the most helpful. The fund had an overweight position in Yihai International Holdings, which we like for its strong balance sheet and business growth potential.
  • On the sector level, the fund’s underweight position in financials had the most positive effect on the fund’s performance relative to the index. In particular, its strategy to underweight major banks such as China Construction Bank benefited the fund’s performance relative to its benchmark.
  • The top three positive contributors were as follows:
    • Yihai International Holdings The Chinese food maker and distributor contributed 357 basis points to the fund’s performance. Hot-pot condiment maker Yihai benefited from lockdowns as people consumed more already prepared instant meals. Shares gained 36 percent in the second quarter while the fund’s index appreciated 9.31 percent during the same period.
    • Sino Biopharmaceutical Limited A producer and distributor of biopharmaceutical products, Sino Biopharmaceutical contributed 145 basis points to the fund’s performance. We like this health company for its growth potential. Beginning in 2021, the company expects to launch three to four products each year.
    • Tianneng Power International An electric battery producer mostly for bikes, Tianneng Power contributed 133 basis points to the fund’s performance. Its shares gained 140 percent in the second quarter on optimism for stronger battery sells. The company also proposed a spin-off of its battery business and separate listing on the Shanghai Stock Exchange.


  • The China Region Fund’s exposure to countries outside of China had a small negative effect on its performance relative to the index. In particular, South Korean equites underperformed on increased political tensions with North Korea. However, the fund’s defensive position had the most negative effect on fund’s performance relative to the index. In the second quarter, the fund had higher cash levels and a position in the Direxion Daily FTSE China Bear 3X Shares (YANG) due to China’s continued trade tensions with the U.S. and coronavirus worries.
  • On the sector level, the fund’s underweight position in information technology had the greatest negative effect on its performance relative to the index. In particular, the fund’s strategy to underweight internet software/services hurt its performance relative to the index.
  • The top three negative contributors were as follows:
    • Direxion Daily FTSE China Bear 3X Shares The ETF contributed negative 48 basis points to the fund’s performance. Despite uncertainty about a market recovery, Chinese equites moved higher during the quarter and the ETF hurt the fund’s performance.
    • HSBC Holdings The international bank contributed negative 29 basis points to the fund’s performance. Shares of HSBC fell on news that the bank will halt paying out dividends and suspended its buyback program over the coronavirus crisis. The China Region Fund underweighed this stock relative to its index.
    • Greenland Hong Kong Holdings The real estate company in mainland China contributed negative 19 basis points to the fund’s performance. Shares underperformed as sales declined 53 percent in the first five months of 2020 compared to the same time a year earlier. The company has since reported better sales data in June.


In the second quarter, Chinese stocks erased losses from the previous quarter, suggesting the nation is recovering from the economic blow of the coronavirus. The purchasing managers’ index (PMI) showed that activity in China’s services sector rose in June at its quickest pace in more than 10 years. Both the manufacturing PMI and services PMI crossed above the 50 level that separates growth from contraction. China’s COVID-19 caseload appeared to be under control, and the reopening of the economy was relatively successful. However, rising tensions between Beijing and the U.S. remained a source of concern for investors. The U.S. is in the process of rescinding Hong Kong’s special trade status after Beijing imposed a controversial national security law on the Asian financial hub. Congress passed a bill that would sanction Chinese officials and banks deemed to have interfered in the city’s autonomy.


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 Managers’ Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing or services. The PMI is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity. It is not possible to invest in an index.

A basis point is one hundredth of one percent, used chiefly in expressing differences of interest rates.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.

Fund portfolios are actively managed, and holdings may change daily and should not be considered a recommendation to buy or sell any security. Holdings are reported as of the most recent quarter-end. Holdings in the China Region Fund as a percentage of net assets as of 6/30/2020: Yihai International Holding Ltd. 13.68%, Sino Biopharmaceutical Ltd. 3.33%, Tianneng Power International Ltd. 1.25%, Direxion Daily FTSE China Bear 3X Shares 0.00%, HSBC Holdings plc 0.00%, Greenland Hong Kong Holdings Ltd. 2.33%.

Net Asset Value
as of 09/18/2020

Global Resources Fund PSPFX $4.99 -0.01 Gold and Precious Metals Fund USERX $14.39 -0.17 World Precious Minerals Fund UNWPX $5.58 0.02 China Region Fund USCOX $9.46 0.08 Emerging Europe Fund EUROX $5.66 -0.06 All American Equity Fund GBTFX $23.51 -0.26 Global Luxury Goods Fund USLUX $17.03 -0.19 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change