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Amundi Funds Global Agriculture should benefit from China’s next five year plan
The main parts of China’s next five year plan (2011-2015), voted in March, have been released. Focusing mainly on improving China’s rural modernization, this plan should benefit Amundi Funds Global Agriculture, which invests at least two thirds of its assets in a selection of international equities issued by companies active in the farming sector. UCITS III compliant, Amundi Funds Global Agriculture is an equity fund, a sub-fund of Amundi’s Luxembourg-domiciled umbrella fund (SICAV), Amundi Funds.
Proposed by the Chinese Government, the plan should accelerate the development of modern agriculture with the primary goal of ensuring grain security. It should also provide strict protection for arable land and encourage innovation and productivity in agricultural technology. This will notably imply a vast grouping of traditional small family farms into profitable companies. The Chinese agricultural sector will then face a strong consolidation but also the emergence of new Chinese actors.
Nicolas Fragneau, manager of Amundi Funds Global Agriculture, comments: “Through the next five year plan, China is implementing a real agricultural revolution that will impact the whole global agricultural value chain.” The plan’s implementation has just started and the 2011 budget pertaining to it amounts to $150 bn. This plan takes place during a period in the agricultural sector where the market faces a situation of imbalance between supply and demand. Production is constrained notably due to a finite amount of arable land, global warming and protectionism, whereas there is strong growth in demand mainly driven by increasing world population, changing dietary habits and biofuel mandates. The Chinese plan will contribute to increasing agricultural supply in order to meet extensive demand. Nicolas Fragneau adds: “The average size of a Chinese farm is 50 times smaller than that of a European farm, bearing out the relevance1 of the consolidation.”
Through this plan, Amundi Funds Global Agriculture’s exposure to Chinese agriculture stocks should increase from 8% to 15% during its period of application2. In the medium term, the portfolio stands to benefit from the plan in several ways:
- The fund’s performance should be positively impacted3: the fund being exposed to companies that are more competitive and profitable, this will imply an increase in equity yields.
- The portfolio’s diversification: the farming sector faces the arrival of new companies and it is also becoming more mature and competitive. The new companies will enhance the fund’s investment universe and it will select the most innovative and profitable ones aiming at improving long-term agricultural productivity.
Amundi Funds Global Agriculture is managed by an investment team of eight analysts with a solid track record and cross-sector experiences. The fund’s management team benefits from in-depth knowledge of the investment theme thanks to the Crédit Agricole Group’s historical roots and privileged relationships with agricultural producers.
1. Past behaviors do not prejudge future behaviors
2. Given for illustrative purpose only
3. No guarantee of performance