Third Quarter 2018

The China Region Fund declined 14.75 percent in the third quarter of 2018, underperforming its benchmark, the Hang Seng Composite Index (HSCI), which declined 5.39 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.


  • The China Region Fund’s small allocations to Thailand and Malaysia provided the fund with its best relative country allocations. 
  • The fund’s selection within and allocation to energy helped most versus the Hang Seng Composite Index’s for the period in question. 
  • The top single stock contributor for the China Region Fund during the third quarter period of 2018 was Sinotruk Hong Kong, which jumped 40.24 percent.  In second and third place for contributions to the fund in the quarter were, respectively, United Energy Group and Taiwanese company Formosa Petrochemical, which rose, again respectively, 54.81 and 27.41 percent in total return.


  • In the third quarter, the poorest-performing country allocations for the fund came from minor allocations to the Philippines as well as the fund’s selection within its heavy allocation to the fund’s benchmark domicile of Hong Kong.
  • The information technology sector constituted the largest detraction with respect to sector allocation for the China Region Fund in the third quarter of 2018.
  • The largest absolute detractor from the fund in the second quarter was Sunny Optical Technology, which declined 8.85 percent in total return during that time, followed by massive index heavyweight Tencent Holdings and automaker Geely Automobile, which declined by 17.93 and 23.34 percent.


  • While China’s gross domestic product (GDP) growth was relatively steady in the second quarter reading that came early in the third quarter, we are still waiting on third quarter data. But it remains notable that despite deterioration in both the official and Caixin Manufacturing Purchasing Manager’s Index (PMI), we have seen relatively solid non-manufacturing/services readings throughout the third quarter for China, with the most recent readings at 54.9 on the official non-manufacturing and 53.1 on the Caixin Services.  U.S.-China trade represents only a minor portion of the broader Chinese economy, a fact which may serve to bolster investors’ gravitas amid continued saturation of “trade war” headlines. 
  • The North Korea situation continues to progress (or at least it appears to do so).  President Donald Trump and North Korea’s Kim Jong Un will reportedly meet at another upcoming summit. North Korea has invited some nuclear inspectors in limited capacity and continues to seek removal of sanctions, while the U.S. continues publicly to demand full denuclearization. In the meantime, South Korea may seek some sanctions relief for “inter-Korean” projects in and with North Korea.
  • Any diminishment in or resolution to the trade tension between the United States and China could conceivably lead to significant boosts to sentiment and certainty.


  • Perhaps the single most troubling development of the quarter is the continued escalation and enactment of tariffs and counter-tariffs in the mounting trade war between China and the United States. Rhetoric remains elevated and, once again, uncertainty continued to grow throughout the quarter, with several brokerage houses and strategists increasingly viewing a full-blown trade war as more likely than not. Because of the lopsided nature of the U.S.-China trade deficit, it remains noteworthy that China cannot match (projected) U.S. tariffs in dollar-for-dollar fashion, which may guide the two countries toward resolving the conflict sooner rather than later. At present, President Trump is scheduled to meet with Chinese President Xi Jinping at the upcoming G20 summit, and perhaps the next round of talks or updates on negotiations will come during or around that time.
  • The weakening of the yuan remains a possible threat (as well as a possible weapon in a trade war); the yuan currently sits around its 52-week lows (highs), well above the 6.90 level, with strategists increasingly envisioning 7+ numbers in the not-so-distant future.  A serious weakening of the yuan or a decline in Chinese purchasing power could create capital flight concerns again.
  • Weaker emerging market currencies remain problematic, but particular attention might be paid to the Indonesian rupiah, the Indian rupee and the Philippine peso. These currencies fell to multiyear (all-time, in India’s case) lows (highs) and all remain subject to inflation concerns. And if you recall, the Philippines’ central bank (BSP) governor Nestor Enpenilla warned that inflation might run hot for a at least a little while—and at the last reading in September, the consumer price index (CPI) was 6.8 percent, which is up from 6.4, which was itself up from 5.7, and so on.

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.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals.  The weights of components are based on consumer spending patterns.

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 9/30/2018: Sinotruk Hong Kong Ltd. 5.39%, United Energy Group Ltd. 1.76%, Formosa Petrochemical Corp. 2.36%, Sunny Optical Technology Co. Inc. 3.85%, Tencent Holdings Ltd. 7.04%, Geely Automobile Holdings Ltd. 1.02%.     

Net Asset Value
as of 02/15/2019

Global Resources Fund PSPFX $4.59 0.03 Gold and Precious Metals Fund USERX $7.51 0.15 World Precious Minerals Fund UNWPX $2.94 0.05 China Region Fund USCOX $8.11 -0.07 Emerging Europe Fund EUROX $6.48 0.05 All American Equity Fund GBTFX $24.03 0.18 Holmes Macro Trends Fund MEGAX $16.80 0.16 Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change