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2021 was a year where marketsentiments played snake and ladders. 1H21 saw a strong performance in equities as an optimistic view of a global post pandemic reopening nearing led to upbeat spirits in market participants. Entering the second half of the year, investors turned a tad more cautious as the resurgence of the delta variant and lately, the omicron variant, dulled the global growth outlook.

So how did Tiger Brokers' investors navigate the market this year? China and Vietnam are the top pick of investors geographically and at a sectorial level, tech continues to be well-liked by our investors. In today's article, we look at the top 5 funds which piqued investors interest and discuss the rationale behind these investments.

Picture 1: Top 5 Subscribed Funds on Tiger Brokers in 2021

China did not fall out of love with investors despite the recent rout

China has experienced a massive drawdown after a stellar run – from peak to trough, Chinese equities have registered a loss of almost 36% (gauged by the MSCI China Index). The two main factors that have resulted investors shunning the nation’s equities are; 1) prolonged regulatory uncertainties surrounding its equity market and 2) concerns about the overall credit health of the Chinese Real Estate sector.

However, we note that our investors have continued to initiate positions into Chinese equities through the $JPMorgan Funds - China A (dist) USD(LU0051755006)$fund, despite the weaker performance. This is likely due to the fact that there are still positives in an investment case into China.

Firstly, China’s plans to change its economic model to become driven by consumption and tech via the ‘Dual Circulation Strategy’ which will benefit sectors providing exposure to these themes. Secondly, the reforms by the Chinese government might have hurt some sectors but those listed on the A shares market are poised to gain. Finally, the economic growth trajectory of China remains bright despite near term headwinds.

The hottest stock market in Asia found its way into investors portfolio too!

Vietnam was the hottest stock market in Asia this year. What propelled its equities performance were two main factors; 1) low interest rates and subdued property prices attracted investors in droves as there were few other investment alternatives - till date, domestic investors makes up about 90% of the market turnover according to VinaCapital and 2) sentiments of market participants was buoyant as they believe that the country has the ability to maintain its growth momentum after being one of the few in Asia to expand last year.

Nonetheless, there is still more upside for Vietnamese equities moving ahead even after the spectacular rally. In the near term, a probable catalyst that will lift equity prices will be if foreign investors reverse their net sales of the nation’s stocks. That said, an investment into Vietnam also offers a compelling growth story over the medium and longer term, backed by; 1) Good foundation – Vietnam has achieved the highest growth among developing countries in Asia and other regions in recent years, 2) strong ongoing momentum – domestic consumption and external demand continues its upward trajectory and 3) promising potential – increasing government spending and foreign direct investment acts as a booster to in the economy’s development.

Given that valuations of the country’s equities are currently still under-appreciated earnings forecast are generally positive, we think investors on our platform may have included Vietnam in their portfolios for the above mentioned reasons via the $LionGlobal Vietnam SGD(SG9999003495)$, which focus on investing in companies that have growth potential in the medium to longer term.

The rationale behind using the fund to initiate an exposure to Vietnam we believe, is due to the fact that the market is not easily accessible and professional management for a niche market will likely bring about additional alpha to investors portfolio.

Tech is still popular despite headwinds

Theoretically, long duration assets like tech stocks should suffer in an environment where inflation is high. However, the performance of the tech sector seems to be unaffected as the sector continues to deliver chunky returns for investors – NASDAQ Index trades at all time and global tech index leads all sectors. This is attributed to the strong fundamentals underpinning possessed by tech names as well as secular growth trends that will aid earnings growth further down the line.

Chart 1: NASDAQ performance defied rising inflation. Source: Bloomberg

With these factors in play, we note that investors have continued to invest in tech by purchasing the $Blackrock World Technology Fund A2 USD(LU0056508442)$, which invests at least 70% of its assets globally in equity of companies whose predominant activity lies in the technology sector. The fund was favoured by investors due to its heavy exposure to software & services and semiconductor equipment in our opinion (more than 60%) –chip shortages caused a surged in chip manufacturer equity prices and the growth of software services remains robust. As such, the fund has much to gain thanks to its asset allocation.

Thematic funds are popular as well

There are various strategies one can adopt when it comes to investing and thematic investing is one of them. This strategy is an approach whereby investors focus on predicted long-term trends rather than specific companies or sectors which allows them to harvest returns from structural shifts that could potentially change the entire industry.

Thanks to the secular growth trends that are present today, the two thematic funds investors have bought into this year to capture growth potential are $Allianz Global Artificial Intelligence AT Acc USD(LU1548497426)$fund and the $BNP Paribas Energy Transition Classic USD(LU0823414478)$fund.

Why did investors choose the Allianz Global Artificial Intelligence AT Acc USD fund?

Artificial intelligence (“AI”) is a common buzzword we hear many talk about but what is it exactly? According to Allianz, AI is the ability of a program or machine to think and learn like a human and it encompasses a broad set of disciplines; deep learning, machine learning, big data, 3D vision, to name a few.

Now that we have a rough idea what AI is, let’s look at some of the benefits of AI. In the healthcare industry, AI is opening up new possibilities such as 1) early & more accurate diagnosis of certain diseases and 2) improving the quality of life through personalized plans and disease prevention.

That said, AI has already been part of our lives if we have yet to notice it. An example would be the personalization of user experience in video streaming and intelligent search for finding relevant video content.

With the opportunities across a broad spectrum of technologies and sectors embracing the disruptive power or AI, it does not come as a surprise that investors have begun to allocate some of their monies to tap on the burgeoning theme by investing in the Allianz Global Artificial intelligence AT Acc USD fund since it’s the only active management approach.

Chart 2: AI’s potential to increase growth in industries. Source: Allianz Global Investors

Why did investors choose the BNP Paribas Energy Transition Classic USD fund?

The theme of sustainable energy have definitely gained traction in an era where the world makes an effort to go green – major economies pledging for net carbon zero. As a result of the initiative, market participants have been pricing in a scenario in which the use of traditional energy sources will be massively reduced over the next three decades.

To give investors more context, we look at a research by McKinsey & Co. According to them, next generation climate technology could attract $1.5 trillion to $2 trillion of capital investment per year by 2025. This highlights the immense potential companies under the umbrella of clean energy possess, which justifies the optimism witnessed.

For an exposure to the rapidly growing space, most investors on our platform have chosen the BNP Paribas Energy Transition Classic USD fund. This fund is an unconstrained fund that is actively managed, with an objective to invest in shares issued by worldwide companies that engage in energy transition – themes include but not limited to; renewable & transitional energy, energy efficiency, sustainable transport, green building and infrastructure.

We reckon that this fund have interested investors because of its focus the direct producers and users of green energy that have much to gain from the transition towards a greener environment. Additionally, the fund is relatively diversified compared to the global equity benchmark from a geographical perspective, limiting the downside risks investors have to take on.

Table 1: fund geographical exposure

Leave us a comment below to let us know what are some of the themes or funds that you would like us to cover next. Merry Christmas and a Happy New Year!

Disclaimer: The information herein was obtained and derived from sources that we believe are reliable, but while reasonable care has been taken to ensure that stated facts are accurate and opinions are fair and reasonable, Tiger Brokers does not represent that it is accurate or complete and it should not be relied upon as such. The information expressed herein is current and does not constitute an offer, recommendation or solicitation, nor does it constitute any prediction of likely future stock performance.