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MegaTrust Investments March 2023 Report

MegaTrust Yangtze Fund IV (Bloomberg: MTSCYZ4 KY) is an open-end Cayman fund investing in China A-shares (domestic Chinese stocks) and offering RMB exposure. It follows the time-tested strategy and process of its predecessor, Yangtze Fund II, with 15 years of track record. The Fund is for Professional Investors only as defined by the Securities and Futures Ordinance of Hong Kong.

Fund performance is omitted here for compliance reasons. MegaTrust clients please refer to my email for details.

China Risks Mostly External

Recently, I reviewed the China investment risks in a three-part series.

• Part One: global economy, inflation and rate hikes, U.S.-China relations

• Part Two: regulatory risks, Chinese real estate

• Part Three: China reopening, Chinese inflation

If we are to assign some kind of weighting here, the top two risks (global macro and US-China relations) will have at least 60% weight. This means the so-called China risks are mainly external at this point.

In March, we witnessed a further bifurcation of the external and internal risks to China. Namely, the global environment has deteriorated, while China’s domestic economy continues to recover. For example, a gradual recovery of the real estate market is clearly underway, which is crucial to domestic consumption.

On second thought, I may have overestimated the Chinese inflation risk. For now, there seems more deflationary pressure than inflation risk in China near-term.

“China is confident and capable of hitting this year’s GDP growth target of around 5%… The dynamism and momentum of China’s economic growth is strong… The [economic] performance in March is even better than January and February’s.” China’s new Premier, Li Qiang, at the Boao Forum, March 2023

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