JPMorgan China Growth & Income

While many western economies like the UK are expecting a recession or are already in one, I think the long-term growth drivers for Asia remain strong. I would consider buying shares in JPMorgan China Growth & Income (LSE: JCGI) for my portfolio.

At the moment the dividend yield is 5.5%. I also think the long-term growth prospects are appealing. The trust’s shares have lost 40% of their value in the past year. That reflects investor concerns about overheating in sections of the Chinese economy and the impact of ongoing pandemic restrictions. But the shares have shot up almost 30% in the past month – and I think there could be more gains to come. The Chinese economy remains in growth mode and some companies are well-positioned to grow their footprint globally as overseas competitors struggle.

Last month, the trust chairman noted that “in the short term, sentiment towards investing in China may well remain negative”. That looks like a buying opportunity for my portfolio, as prices have been depressed while the long-term growth story remains strong.

European Assets Trust

Another area that may not suffer from a UK recession too much is Continental Europe. Of course, Europe has its own economic challenges and some large European economies are already in recession. But others are not, and I think the region also benefits from resilient industrial demand in countries like Germany.

Germany is a key focus for the European Assets Trust (LSE: EAT), which specialises in small and medium enterprises. While a recession could eat into profits and limit the growth of such companies, it might also lead to fewer competitors surviving in the marketplace. That could create new growth opportunities I think European Assets Trust could benefit from.

The dividend yield is 9.0%, which I regard as very attractive. Does that high yield suggest investors are pencilling in a dividend cut? It may do. The trust has a dividend policy targeting a payout based on its net asset value at the end of the year. The share price is down 34% so far in 2022 (and 30% over the past 12 months), so a dividend cut could come next year if the net asset value remains depressed.

That might still leave a decent dividend yield, though. I also like the chance of exposure to a range of growth stories in a variety of European economies. So I would consider buying these shares for my portfolio.

Two investment trusts with dividends I’d buy

Both of these shares offer me dividends. They also offer me the prospect of long-term growth. Like dividends, capital growth is never guaranteed; I might lose money instead. But as a long-term investor, I think the prospects for China and Europe in the medium term are promising.

These two investment trusts with dividends offer me exposure to that. I would consider buying both for my portfolio.

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In the grand scheme of things, the trust is relatively small with net assets of only £185m at the end of December 2017. However, its size has not held it back. Over the past five years, the company has delivered an annualised net asset value total return per share of 20.4%, that’s compared to a return of just 15.5% for its benchmark small-cap index.

Working to unlock value 

Strategic Equity has been able to generate this outperformance thanks to its interesting strategy of finding companies that are looking to increase their value through strategic, operational management change. The investment managers then work with these companies to enhance shareholder value. This activist approach is different to the buy-and-hold approach employed by many other investment trusts, but Strategic Equity’s returns speak for themselves.

There were just 19 Holdings in the investment company’s portfolio at the end of December, and the top 10 account for nearly two-thirds of net asset value. While this sort of concentration might not be appropriate for other investment trusts, with Strategic Equity, the fact that the firm is engaging with its investments to unlock value, reduces risk. 

For example, one of the more substantial holdings, accounting for 8% of the portfolio at the end of 2017 was small-cap Wilmington. To help unlock value here, during 2017, Strategic Equity “put forward two experienced candidates” to replace the firm’s existing chairman. These new candidates should, according to the trust’s year-end update, help the market realise the value of “deeply undervalued” Wilmington.

At the time of writing, shares in this champion investment trust are trading at a 12.8% discount to net asset value and help unlock further value from the portfolio, management is buying back shares to reduce the discount.

Emerging market play 

Another investment trust I’d buy for my portfolio today is the JP Morgan Chinese Investment Trust (LSE: JMC). 

Every investor should have some exposure to emerging markets in their portfolio as these regions are growing at a much faster clip than developed regions. Also, China specifically is becoming a world leader in technology, and the country’s tech firms have grown to become some of the most significant and most important in the world over the past decade.

JP Morgan China is well positioned to take advantage of these trends. Over the past five years, the trust has produced a total return for investors of a little over 100% thanks to its extensive exposure to Chinese tech stocks such as Tencent and Alibaba. These two holdings account for just under 20% of the portfolio.

The one downside of this investment is its high price. The total annual charge is around 1.4%, which is nearly three times more than the annual dividend of 0.5% offered to shareholders. Still, I believe that this is a this is a price worth paying to invest alongside experienced investors in one of the world’s fastest-growing economies.

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JPMorgan Chinese Investment Trust

With a population of a staggering 1.4bn people, China is expected to surpass the United States to become the world’s largest economy in the near future. Urbanisation across the Asian powerhouse has resulted in impressive economic growth in recent decades. However, with around 44% of the population still living a rural lifestyle, it’s likely that there’s significant growth to come.

As China transitions from a capital expenditure-led economy to a consumer-led one, the wealth of the Chinese middle class is increasing rapidly. This should result in an abundance of investment opportunities across sectors such technology, leisure, travel and healthcare. Can UK investors capitalise on this exciting growth story? Absolutely.

One easy way to get exposure to the country is through the JPMorgan Chinese Investment Trust (LSE: JMC). Listed on the London Stock Exchange, you can buy this trust through regular brokerage platforms such as Hargreaves Lansdown. Its ongoing charge is 1.4%.

JMC aims to provide investors with long-term capital growth by investing in companies associated with Greater China. The portfolio holds between 45-65 stocks, including names such as Alibaba, Tencent Holdings and Bank of China. It’s currently overweight in the consumer, technology and healthcare sectors. 

The trust has performed spectacularly well over the last year, returning over 50%. Of course, after such a strong run, it would not surprise me if Chinese stocks experienced a correction. However, over the long term, I believe the potential here is massive. As such, this could be an excellent addition to a diversified growth portfolio. 

JPMorgan Emerging Markets Investment Trust

For those looking to spread their capital over several different regions in the pursuit of powerful growth, the JPMorgan Emerging Markets Investment Trust (LSE: JMG) could be a good option. Like the Chinese trust, it can be purchased very easily through a regular broker under ticker JMG. Ongoing charges are 1.3%.

While JMG has a near-20% exposure to China, it also has significant exposure to fast-growing economies such as India, Brazil and Taiwan. Key stocks in the portfolio currently include Tencent Holdings, Alibaba and AIA Group.

Emerging markets’ growth has been sluggish in recent years, however, momentum appears to be picking up again. As a result, the trust has returned almost 30% over the past year.

It’s worth remembering that emerging market regions can be volatile. Therefore, these kinds of investments may not be suited to risk-averse investors. However, for those comfortable with volatility, I believe both trusts offer exciting long-term potential. If you don’t invest now, you may look back in a decade’s time, and regret it. 

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