The £160 million Baillie Gifford China Growth Trust plc said its net asset value (NAV) total return was 35.4% in the year to January 31, 2025, compared with a total return of 32.4% for the MSCI China All Shares Index.
The investment trust’s share price total return was 29.4%. The fund’s discount widened to an average of 11.6% from 11.3% in 2023-24.
The biggest holdings of Baillie Gifford China Growth Trust during the year included Tencent, ByteDance, Alibaba Group, online food delivery company Meituan, luxury baijiu maker Kweichow Moutai, electric vehicle battery maker CATL, online retailer PDD Holdings, China Merchants Bank, Ping An Insurance and home appliance giant Midea Group.
Baillie Gifford China Growth Trust is managed by Linda Lin and Sophie Earnshaw, who wrote: “The Chinese government’s decisive policy shift in September 2024 was a key turning point for the market.
“Here, the government unveiled a comprehensive economic package to stabilise key sectors and reignite growth after years of cautious policymaking. As part of this initiative, authorities introduced a 50-basis point interest rate cut, which spurred credit growth of 15%, and launched targeted liquidity injections of RMB 300bn, directly benefiting the property sector by helping reverse a 30% decline in transactions and fuelling a 10% rebound in sales.
“In addition, new measures encouraged listed companies to conduct share buybacks – up to 5% of their profits – to boost market confidence. Tax breaks and R&D subsidies were also strengthened.
“Beyond financial stimulus, Beijing took meaningful steps to restore confidence in the private sector, particularly in internet and technology industries, signalling a renewed focus on their roles as key engines of growth and innovation.
“Following the September announcement, the market saw one of its sharpest rallies in years, with the CSI 300 index surging over 30% in just two weeks. However, the sustainability of this momentum hinges on effective policy execution and its impact on long-term economic fundamentals.
“Despite the rally, investor sentiment remains cautious, with close attention being paid to indicators such as consumer spending, credit growth, and property market activity in order to assess the true depth and speed of recovery.
“While retail participation has surged, signalling short-term optimism, we would note that a meaningful rebalancing of the economy from an infrastructure and debt driven model to one which is fuelled by innovation and domestic consumption will take time. The transition is likely to remain uneven and patience is likely to be required …”
Baillie Gifford China Growth Trust chair Nicholas Pink wrote: “Government stimulus was a catalyst for a substantial rally in China equities, the renaissance of the growth style and outperformance by the company, partially reversing the disappointing performance since the mandate change.
“This positive performance has continued since the financial year-end driven by the launch of DeepSeek and President Xi’s meeting with the tech entrepreneurs …
“The rebound in the company’s performance in absolute and relative terms during the financial period was striking …
“As the year progressed, the company’s growth style began to outperform value, providing a tail wind for Baillie Gifford’s management style for the first time in four years.
“Whilst insufficient to offset the preceding three years underperformance, the financial year to 31 January 2025 may mark a tipping point if China equity market gains can be sustained …”