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August 2015

The China Region Fund declined 9.71 percent in August, outperforming its benchmark Hang Seng Composite Index, which lost 11.62 percent. See complete fund performance here.


  • A higher-than-normal cash level, as well as investments in markets outside of Hong Kong and China, were major contributors to outperformance of the fund. Continued government intervention in the A Share market, abrupt and poorly communicated depreciation of the Chinese renminbi and little sign of economic growth recovery further weakened investor confidence toward China.
  • Stock selection in consumer goods and information technology proved most successful in generating excess return for the fund. Quality consumer and technology franchises with exports capacity and low U.S. dollar debt outperformed, as investors rushed to minimize currency risks.
  • Sino Biopharmaceutical, a leading Chinese integrated pharmaceutical enterprise, was the top contributor to the fund with a 2.37 percent gain for the month.


  • Country exposure to China bore the brunt of a global market selloff, as momentous negative sentiment carried over from July was aggravated by fears of a competitive currency war among emerging economies triggered by China’s ill-timed devaluation of its currency.  
  • Being underweight telecommunication services, which registered the least decline in a volatile month thanks to its defensive nature, was also an adverse contributor to performance.
  • AIA Group, the largest independent pan-Asian multiline insurance company, was the worst contributor with a 14.80 percent decline for the month.  


  • Fears of a stronger U.S. dollar—given the Federal Reserve’s inclination to raise rates and the European Central Bank’s (ECB) bias toward extending quantitative easing (QE) measures—might aggravate market concerns that Chinese currency devaluation might resume beyond the short term and that capital flight from China could intensify. Against unsettling investor sentiment, lingering market volatility, diminishing confidence in policies and little sign of economic recovery, cash as an asset class may continue to outperform in the short term.  
  • Rising stock market volatility in China might shift investor attention toward real assets including property, as home prices have seen sustained recovery since April. Given the property sector’s significance in generating economic activity, unchanged path of falling interest rates, historically cheap valuation and recent policy relaxation for foreign buyers, we believe quality Chinese property developers with more exposure to major metropolitans should outperform going forward.
  • While the unexpected depreciation of the Chinese renminbi against the U.S. dollar was poorly communicated by authorities, China’s move did not deviate from its strategic commitment to making its currency value more market-oriented ahead of President Xi Jinping’s state visit to the U.S. in September and the International Monetary Fund’s (IMF) decision whether to add the Chinese currency in its reserve basket. A weaker renminbi should help alleviate intensifying deflationary pressure in domestic China and benefit local companies with low dollar-denominated debt and solid export business.


  • Malaysia’s foreign exchange reserve fell below $100 billion in July for the first time since August 2010. Unabated political scandal, slumping local currency, accelerating capital outflow, growing fiscal pressure and, above all, a real threat of crude oil declining further make the net energy exporting country vulnerable for sustained underperformance within emerging Asia. 
  • Hong Kong’s 8.4 percent drop in visitor arrivals in July, led by a 9.8 percent plunge in Chinese tourist arrivals, might aggravate investors’ secular concern that Hong Kong is losing its attraction for mainland middle class Chinese. This cohort prefers traveling farther from home and cyclical worries about purchasing power erosion for Chinese travelers from a weaker Chinese renminbi. Local Hong Kong retail, transport, restaurant and hotel industries should be most at risk.
  • Macau’s 26 percent decline in second quarter GDP and 36 percent plunge in August gaming revenue should bring further revelation that a meaningful recovery has not occurred in the city, as newly opened casinos in Cotai failed to drive sufficient mass market demand to offset the retrenchment of high rollers.  Subdued visibility of industry growth, less than attractive valuation, and dearth of sustainable catalysts may continue to weigh on investor sentiment toward Macau casino stocks.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees of 0.05%) which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end here or by calling 1-800-US-FUNDS.

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.

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 06/30/2014: Sino Biopharmaceutical Limited 0.61%; AIA Group Ltd. 1.92%.

Net Asset Value
as of 10/05/2015

Global Resources Fund PSPFX $4.85 0.05 Gold and Precious Metals Fund USERX $5.11 0.14 World Precious Minerals Fund UNWPX $4.09 0.08 China Region Fund USCOX $7.56 0.10 Emerging Europe Fund EUROX $5.48 0.11 All American Equity Fund GBTFX $26.42 0.30 Holmes Macro Trends Fund MEGAX $19.80 0.22 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.01 No Change