In a month of political turmoil as Trump policies and interest rate decisions came to light, China regained favour among investors with a 13.4% gain of the Hang Seng.
The upswing for China carried from the stockmarket over to individual funds, where the IA China/Greater China sector gained 7.3% in the month while no other sector managed a gain over 1%.
Ben Yearsley (pictured), director of Fairview Investing Limited, pointed to softer-than-anticipated tariff policies and DeepSeek innovation for the market’s change of tune, along with “the realisation that Chinese stocks are cheap and that their tech companies are pretty good”.
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Bond markets also felt turbulence across the past month, as inflation has proved difficult to tamp down. The UK saw inflation rise to 3% in its last reading and the official US figure sits at the same level, though the Truflation reading for the US is at 1.51%.
“The bond markets can’t seem to decide where rates are going. There does appear to be a disconnect between bonds, expectations and what central banks are doing. Inflation is probably the stat causing the most angst. It feels as if Europe, including the UK, is on a different trajectory to the US,” Yearsley said.
Despite the volatility, the IA Sterling High Yield and Sterling Strategic Bond sectors made returns of 0.9%, putting them in the top five gains for the month. China led at 7.3%, following by Europe including UK at 0.98% and Europe ex UK at 0.9%.
On the other end of the table, India fell 8.8% while North American Smaller Companies dropped 8.5%. Tech also took a downturn at 6.1%.
“It was a bit more interesting at the foot of the table with India’s recent bear market continuing with the average fund falling another 8.82% in February bringing 2025 falls to 13.6% now,” Yearsley said.
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“It wasn’t much better for the US last month either with the weak dollar not helping returns. US small-cap stocks got taken to the cleaners a bit with the average fund falling over 8% and the main US fund sector also 4.5%. is the prospect of one or no rate cuts this year starting to impact on equity valuations?”
While February proved difficult for long-time favourite markets, the UK was able to take a breath of fresh air, as the FTSE 100 gained 2% in February.
“It already feels like this year is going to be volatile. Scratch that, make that the next four years,” Yearsley said.
“However, for once the UK isn’t in the firing line. Maybe there is some comfort in the cheapness of the UK market though it doesn’t seem to be helping the most unloved of asset classes, UK smaller companies.”
By individual fund, all but one of the top 10 was a China-focused strategy, with JPM Emerging Europe Equity sneaking into the fifth slot. RBC Funds China Equity topped the chart with a 14.8% return, following by Pictet China Index, GAM Star China Equity, and Redwheel China Equity.
US and India focused funds made up most of the worst performers, with Artemis US Smaller Companies losing 14.7%, Alger Weatherbie Specialised Growth dropping 13.9% and Nomura American Centry US Focused Innovation falling 13.2%.
Across investment trusts, BBGI Global Infrastructure rose 17.5%, followed by Gresham House Energy Storage with a 16.9% gain and Baillie Gifford China Growth at 15.5%.
“With a large amount of M&A in the trust world it will be no surprise seeing a different takeover target topping the tables each month. It’s two for two now. Following on from Ground Rents Income in January, it’s the turn of BBGI Global Infrastructure in February receiving a bid approach and topping the tables with a gain of 17.49%.
This story was written by our sister title, Portfolio Adviser
