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October 2015

The China Region Fund gained 5.51 percent in October, underperforming its benchmark, the Hang Seng Composite Index, which advanced 8.67 percent. See complete fund performance here.


  • Exposure to Hong Kong and Indonesia contributed most positively to fund performance. A revenge rally unfolded in both markets after a traumatic third quarter reduced both to salient laggards within emerging Asia, due to ferociously negative contagion from China.  
  • Selective exposure to financials and underweight in utilities proved most successful in generating excess return for the fund.  Asset price-sensitive names in wealth management and insurance benefited from the oversold market rally, whereas defensive sectors such as utilities and telecommunications visibly lagged.
  • Tencent Holdings, a leading Chinese internet software and services provider, was the top contributor to the fund with a 13.38 percent gain for the month.


  • Exposure outside of the benchmark and higher-than-normal cash positions were detractors from fund performance, as a majority of other emerging Asian markets underperformed Hong Kong and China in a month where the benchmark staged the largest countertrend rally since April this year.
  • High-quality companies within consumer goods and industrials underperformed the most amid a quick reversal of global risk appetite, where companies with lower earnings revisions and higher short seller interest charged ahead of others.    
  • Zhuzhou CSR Times Electric, a leading provider of railcar equipment in China, was the worst contributor with a 11.39 percent decline for the month.


  • Tangibly recovering new home sales in the context of continued decline of land purchases and housing starts in major Chinese cities should bode well for future pricing power of Chinese property developers by shrinking market supply, given the lengthy lead time from land acquisition to new supply launches. Relaxed approval of local corporate bond issuance for developers should also help reduce funding costs for developers, given falling interest rates domestically and less risk associated with foreign currency debt. Quality Chinese property developers should continue to benefit from tighter supply expectations and favorable government policy.
  • China's decision to resume initial public offerings in its domestic A Share market by year end after a five-month freeze due to the summer market rout should directly benefit local investment banks and brokers by restarting deal flows.  Higher trading volume has already resulted in a 74 percent sequential jump in net earnings for 23 listed brokers in October, and investor sentiment might continue to improve towards equity market-sensitive industries such as brokers, asset managers and insurers, given stabilization of China's macro data and improving news flow. 
  • Thanks to a strong rebound in private consumption and government spending, South Korea's better-than-expected GDP growth at 2.6 percent in the third quarter should reinforce investors' preference for Korean sectors geared toward domestic demand rather than global demand. Financials, consumer staples and pharmaceuticals may continue to outperform electronics and industrials exporters.


  • Federal Reserve Chair Janet Yellen's indication of a December interest rate hike as a "live possibility" during her congressional testimony this week, coupled with a stronger-than-expected October nonfarm payroll report, significantly increased investor expectations of higher interest rates in the U.S. by yearend. This dynamic may add to the positive momentum of a strengthening U.S. dollar in the short term and rekindle volatility in emerging Asian currencies and equities as a result of further liquidity exodus from the region.
  • A resurgence of the two-year U.S. Treasury yield to the highest level since May 2010 and visible pullback of more commodity-driven Southeast Asian markets such as Malaysia in the past month might be early signs of exhaustion for the global countertrend rally in October. Lower quality companies, especially in energy and materials, with leveraged balance sheets and inferior cash flow, remain vulnerable after the earnings season.
  • More and more, China's middle class appears to prefer visiting different cultures farther away from home than Hong Kong, as retail sales in the city continue to contract year-over-year. Fewer Chinese tourists in September only added to the slowdown. This ongoing trend bodes especially ill for Hong Kong retailers and hotels.


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 09/30/2015: Tencent Holdings Ltd. 6.69%, Zhuzhou CSR Times Electric Co. 1.66%.

Net Asset Value
as of 11/24/2015

Global Resources Fund PSPFX $4.94 0.05 Gold and Precious Metals Fund USERX $4.76 0.05 World Precious Minerals Fund UNWPX $3.90 0.07 China Region Fund USCOX $7.77 0.01 Emerging Europe Fund EUROX $5.60 -0.11 All American Equity Fund GBTFX $27.22 0.06 Holmes Macro Trends Fund MEGAX $20.68 -0.03 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change