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301 Pages·2016·1.05 MB·English

Allianz
Global Investors
Choice Fund
Semi-Annual Report (Unaudited)
For the six months ended 31 March 2019
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Contents
Page(s)
Management and Administration 1
Manager’s Report 2
Statement of Net Assets/
Portfolio Statement/Statement of Movements in Portfolio Holdings
– Allianz Choice Flexi Balanced Fund 14
(Formerly known as Allianz Choice Absolute Return Fund)
– Allianz Choice Asian Fund 23
– Allianz Choice Balanced Fund 28
– Allianz Choice Capital Stable Fund 31
– Allianz Choice Greater China Fund 34
– Allianz Choice Growth Fund 39
– Allianz Choice Hong Kong Fund 42
– Allianz Choice Oriental Fund 46
– Allianz Choice Stable Growth Fund 51
– Allianz Choice HK$ Liquidity Fund 54
– Allianz Choice HK$ Cash Fund 57
– Allianz Choice RMB Money Market Fund 60
– Allianz Choice “Best Styles” Europe Fund 63
– Allianz Choice “Best Styles” US Fund 73
– Allianz Choice Global Fixed Income Fund 83
– Allianz Choice Japan Fund 91
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Management and Administration
Registered Office
Allianz Global Investors Asia Pacific Limited
27/F, ICBC Tower
3 Garden Road
Central
Hong Kong
Telephone: [phone]
Manager and Registrar
Allianz Global Investors Asia Pacific Limited (“the Manager”) (“the Registrar”)
27/F, ICBC Tower
3 Garden Road
Central
Hong Kong
Sub-Manager
Allianz Global Investors U.S. LLC (“the Sub-Manager of Allianz Choice “Best Styles” US Fund”)
Suite 1700
555 Mission Street
San Francisco, CA 94105
United States
Allianz Global Investors GmbH (“the Sub-Manager of Allianz Choice “Best Styles” Europe Fund”)
Bockenheimer Landstrasse 42 – 44
60323 Frankfurt/Main
Germany
Trustee and Custodian
HSBC Institutional Trust Services (Asia) Limited (“the Trustee”) (“the Custodian”)
滙豐機構信託服務（亞洲）有限公司
1 Queen’s Road Central
Hong Kong
Auditor
PricewaterhouseCoopers
22nd Floor
Prince’s Building
Central
Hong Kong
1
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Manager’s Report
Allianz Choice Flexi Balanced Fund
(Formerly known as Allianz Choice Absolute Return Fund)
Market Review
Global equities underwent a severe reversal in the fourth quarter of 2018 with many markets entering bear territory. A sudden
rise in bond yields at the start of October provided the catalyst for the sell off. Worries that earnings may have peaked also
weighed on shares. After a relatively quiet November, stocks plunged once again in December, as weak economic data in
Europe and Japan prompted fears over the impact of higher tariffs and the outlook for global growth. Global government bonds
sold off sharply at the start of October as stronger-than-expected US economic data raised concerns that the Federal Reserve
would need to adopt a more hawkish stance. However, bonds more than recouped their earlier losses in December when the
stock market volatility boosted demand for lower risk assets. The yield on the 10-year US Treasury fell back below 2.7% – a
level last seen in February – while the 10-year German Bund yield slid below 0.25%. In contrast to government bonds which
closed the quarter with modest gains, corporate bonds declined, with high-yield debt particularly affected by the steep fall in
global stocks and weaker oil prices.
Global equities rallied strongly over the first quarter of 2019, rebounding from their sharp sell-off at the end of 2018 as many
markets recorded their strongest quarterly gains since 2010. Sentiment was lifted by hopes of improved trade relations between
the US and China and a dovish tone from major central banks. However, the rally slowed as the quarter progressed amid
growing concerns over the outlook for global growth. Global bonds rallied, boosted by dovish stance from US Federal Reserve
and European Central Bank. Global bonds rallied in Q1 2019. Yields moved decisively lower to touch multi-month lows,
boosted by dovish monetary policy from the US Federal Reserve and European Central Bank.
Outlook
Global economy is facing a deceleration with Eurozone and China being the most disappointing geographic areas, while US
remains as the healthiest economy. Recent economic data also suggested that US economy is far from recessionary levels which
may not warrant any monetary policy easing measures. Minimal inflation pressures should allow the Fed to remain “patient”.
Thus, we expect rates will likely to remain on hold for the remainder of this year given the hurdle for the Fed to cut or to
hike rates is relatively high. US Treasury will likely engage in a range trading mode with short to medium part of the curve
anchored by the Fed Fund rates.
In the Euroland, weak growth outlook has been confirmed as European leading and hard data continued to surprise on the
downside. We expect the economic backdrop in Euroland will remain weak over the medium term as result of uncertainties
caused by regional political turbulence and global trade tensions. Weak economy and imbalance of economic growth would
still require ample degree of monetary accommodation from the ECB over the medium-term. Hence, we expect a prolonged
low interest rate environment may revive the positive carry trades and may support the peripheral spreads in the near term.
Accommodative monetary policy stance by the ECB should be also supportive for core government bonds, but suppressive for
strong gains in EUR/USD.
2
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Allianz Choice Asian Fund
Market Review
Equity markets in Asia closed the six months ending 31 March 2019 in positive territory, as performance was spilt into two
halves. During the last quarter of 2018, markets retreated as concerns over the impact of higher tariffs added to worries over
the outlook for global growth, particularly in China. Chinese equities were among the weakest performers in the region, with
key indices closing the quarter near a four-year low.
In contrast, the rebound in the first quarter in 2019 not only reversed the losses from the previous quarter but ended the
period up posting positive return. Sentiment was driven by hopes for improved trade relations between the US and China, as
well as dovish comments from major central banks, especially the US Fed. Chinese equities posted double-digit gains as they
rebounded from a weak end to 2018, and led the region up.
From a sector performance, real estate was the strongest performer with more than 20% return in HKD terms; while healthcare
and energy were the laggard sectors.
Outlook
The first quarter 2019 has turned out to be the mirror image of the final quarter of last year. Asia as a region has recovered all
of the losses that were made in the last quarter. The easing of macro factors such as the more dovish tone of the US Federal
Reserve, a weaker US dollar, and expectations of progress in the US/China trade dispute have altered investor sentiment
towards a more optimistic outlook.
Looking ahead, it is likely that a more sustainable recovery in the markets will require an improvement in the fundamental
outlook for corporate earnings along with a supportive economic environment in China. From our dialogue with companies in
China there are encouraging signs that this in underway, although this has yet to show up in most official macro data.
The portfolio continues to be relatively diversified with a focus towards stocks with strong earnings visibility and resilient
earnings streams. There is an overweight position in Singapore and selected ASEAN countries which is funded by an
underweight in China, South Korea and India.
3
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Manager’s Report
(continued)
Allianz Choice Lifestyle Funds (Allianz Choice Balanced Fund, Allianz Choice Capital
Stable Fund, Allianz Choice Growth Fund and Allianz Choice Stable Growth Fund)
Market Review
Global equities underwent a severe reversal in the fourth quarter of 2018 with many markets entering bear territory. A sudden
rise in bond yields at the start of October provided the catalyst for the sell off. Worries that earnings may have peaked also
weighed on shares. After a relatively quiet November, stocks plunged once again in December, as weak economic data in
Europe and Japan prompted fears over the impact of higher tariffs and the outlook for global growth. Global government bonds
sold off sharply at the start of October as stronger-than-expected US economic data raised concerns that the Federal Reserve
would need to adopt a more hawkish stance. However, bonds more than recouped their earlier losses in December when the
stock market volatility boosted demand for lower risk assets. The yield on the 10-year US Treasury fell back below 2.7 % – a
level last seen in February – while the 10-year German Bund yield slid below 0.25%. In contrast to government bonds which
closed the quarter with modest gains, corporate bonds declined, with high-yield debt particularly affected by the steep fall in
global stocks and weaker oil prices.
Global equities rallied strongly over the first quarter of 2019, rebounding from their sharp sell-off at the end of 2018 as many
markets recorded their strongest quarterly gains since 2010. Sentiment was lifted by hopes of improved trade relations between
the US and China and a dovish tone from major central banks. However, the rally slowed as the quarter progressed amid
growing concerns over the outlook for global growth. Global bonds rallied, boosted by dovish stance from US Federal Reserve
and European Central Bank. Global bonds rallied in Q1 2019. Yields moved decisively lower to touch multi-month lows,
boosted by dovish monetary policy from the US Federal Reserve and European Central Bank.
Outlook
We expect a less tightening financial conditions on the back of the dovish tilt by the Fed shall remain supportive for risky
assets at the beginning of the 2nd quarter. After a sharp rebound in risky assets in Q1, we expect volatilities may pick up
in the Q2 with strength of economy and corporate earnings to become the major drivers in market movement. The funds
currently maintain an overweight position in equities over bonds and will closely monitor the market development to capture
any investment opportunities as volatility emerges.

Within the developed markets, the funds favor US equities over Europe and Japan. US equities are supported by Fed’s dovish
shift and the signal that it will end its balance sheet reduction earlier than market expectation. We hold a neutral stance in
European equities. While idiosyncratic issues may continue to weigh on growth, financial conditions have eased significantly
across the Euro area in the recent month and ECB’s monetary stance remains accommodative. It is possible that Europe may
surprise on the upside given the market is anticipating a very pessimistic outlook for Europe. On the other hand, we expect
Japan may likely remain as laggard within the global context. Japan’s external trade and industrial production activities will
likely remain sluggish in 2Q19 until better Asia’s growth and a clear outcome in the US-China trade dispute.
In Asia ex Japan, we have a positive view across the region. Fiscal stimulus, monetary policy support together with credit
easing measures in China have been effective as recent economic data have shown signs of recovery. While the China
government may stay put on additional stimulus package amid signs of stabilization in economy, potential US-China trade deal
should fuel sentiment-driven rebound in activities and support growth. This would improve global risk appetite and support
other Asian countries as well. In addition, we expect North Asia to benefit from the recovery of semiconductor sector and
growth in technology export.
On the fixed income front, the fund maintains overweight position in US against Europe and Japan given the US Federal
Reserve is more advanced in terms of its interest rate normalization cycle.
4
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Allianz Choice Greater China Fund
Market Review
Greater China equities posted positive returns for the six months ending 31 March 2019, with markets split into two halves.
During the last quarter of 2018, markets retreated since concerns over the impact of higher tariffs added to worries over the
outlook for global growth, particularly in China. Greater Chinese equities were among the weakest performers in Asia, with
key indices closing the quarter near a four-year low in China.
In contract, the rebound in the first quarter in 2019 was so strong that previous loss was reversed. Sentiment was driven by
hopes for improved trade relations between the US and China, as well as dovish comments from major central banks, especially
the US Fed. News that MSCI was to increase the China A weighting in its widely-followed emerging markets index was also
a positive factor. Foreign investor flows through the Stock Connect schemes continue to reach new record levels. In terms
of sector performances, real estate and consumer discretionary were the top performers; while energy and healthcare lagged
the benchmark. Within the region, Hong Kong equities outperformed the most which was supported by real estate; while
Taiwanese equities underperformed due to high exposure to technology companies that are particularly vulnerable to trade
conflicts.
Outlook
Going forward, we believe government’s policy stance remains the crucial factor driving Chinese markets, and the direction
so far is still pointing towards the loosening front. For example, with the current campaign to support small and medium
enterprises, number of corporate defaults have fallen meaningfully year to date. Also, encouragingly, we are seeing a growing
number of indicators of an economic stabilization in China, especially from our meetings with company management. In some
areas order backlogs have risen and the level of inventories – which rose sharply in the final months of last year – have fallen.
Both demand and supply, therefore, are moving back into a better balance.
We are not expecting a sharp rebound in China’s economic growth this year. Given the extent of the fiscal deficit, there is less
scope for the type of stimulus packages we have seen in the past. But the economic policies so far do at least seem to have put
a floor under the bumpy deceleration seen last year.
5
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Manager’s Report
(continued)
Allianz Choice Hong Kong Fund
Market Review
Hong Kong equities posted positive returns for the six months ending 31 March 2019, with markets split into two halves.
During the last quarter of 2018, market was dragged lower by the weak economic growth in China as well as continuous
concerns over the trade conflict between China and the US. In particular, the Hong Kong listed Chinese companies suffered
the most while domestic Hong Kong stocks held up relatively better.
In contrast, the rebound in the first quarter in 2019 was so strong that previous loss was reversed and markets were able to
post positive return. Positive sentiment was driven by hopes for improved trade relations between the US and China, as well
as dovish comments from major central banks, especially the US Fed. On macroeconomic front, China’s economic data showed
some signs of stabilization towards the end of the first quarter. This came earlier than many investors had expected and was
a good reflection of the stimulus measures done by the Chinese authorities since late 2018. In terms of sector performance,
technology led the market followed by financials; while oil & gas and healthcare underperformed the overall market.
Outlook
Going forward, we believe government’s policy stance remains the crucial factor driving Chinese markets, and the direction is
clearly pointing towards the loosening front. For example, with the current campaign to support small and medium enterprises,
number of corporate defaults have fallen meaningfully year to date. Also, encouragingly, we are seeing a growing number
of indicators of an economic stabilization in China, especially from our meetings with company management. In some areas
order backlogs have risen and the level of inventories – which rose sharply in the final months of last year – have fallen. Both
demand and supply, therefore, are moving back into a better balance.
We are not expecting a sharp rebound in China’s economic growth this year. Given the extent of the fiscal deficit, there is less
scope for the type of stimulus packages we have seen in the past. But the economic policies so far do at least seem to have put
a floor under the bumpy deceleration seen last year.
6
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Allianz Choice Oriental Fund
Market Review
Equity markets in Asia Pacific retreated over the six months ending 31 March 2019, with markets split into two halves. During
the last quarter of 2018, markets retreated since concerns over the impact of higher tariffs added to worries over the outlook
for global growth, particularly in China. Chinese equities were among the weakest performers in the region, with key indices
closing the quarter near a four-year low.
In contract, the rebound in the first quarter in 2019 was strong. Sentiment was driven by hopes for improved trade relations
between the US and China, as well as dovish comments from major central banks, especially the US Fed. Chinese equities
posted double-digit gains as they rebounded from a weak end to 2018, and led the advance in the region. In terms of sector
performance, real estate and utilities outperformed, while energy and healthcare underperformed the most.
Outlook
The first quarter 2019 has turned out to be the mirror image of the final quarter of last year. Asia as a region has recovered all
of the losses that were made in the last quarter. The easing of macro factors such as the more dovish tone of the US Federal
Reserve, a weaker US dollar, and expectations of progress in the US/China trade dispute have altered investor sentiment
towards a more optimistic outlook.
Looking ahead, it is likely that a more sustainable recovery in the markets will require an improvement in the fundamental
outlook for corporate earnings along with a supportive economic environment in China. From our dialogue with companies in
China there are encouraging signs that this in underway, although this has yet to show up in most official macro data.
7
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Allianz Global Investors Choice Fund
Semi-Annual Report – For the six months ended 31 March 2019
Manager’s Report
(continued)
Allianz Choice HK$ Liquidity Fund & Allianz Choice HK$ Cash Fund
Market Review
HIBOR rates retreated in October and November as liquidity eased after the September quarter-end. The 3-month HKD Hibor
fell from 2.2% as at end of September to 1.97% in late November. However, as banks prepare for year-end liquidity, the HKD
Hibor fixings edged higher in December and reached a peak of 2.44% in mid-December. Overall, the 3-month HKD Hibor
rose from 2.2% as at end of September to 2.33% as at end of December. Aggregate Balance has stabilized at the current level
of HKD 76 billion over the past month as the HKD stayed away from the weak end of the trading band without HKMA’s
intervention. While the US Fed raised interest rates by 25bp in December, Hong Kong banks decided to keep the prime rate
unchanged.
HIBOR rates retreated in January and February 2019 as liquidity eased after the year-end. The HKD HIBOR fell faster than
USD LIBOR, the 3-month LIBOR-HIBOR differential widened from 48 basis points at the end of December to over 100 basis
points at the end of January and February, a level last seen in April 2018. As a result of rising interest rate differential between
HK and US, HKD currency depreciated to 7.85 per USD, the weak end of the trading band, triggering HKMA’s intervention
to withdraw liquidity from the system. The aggregate balance decreased from HKD76.3 billion to HKD64.8 billion in March.
While the size of the aggregate balance decreased, the magnitude of HKMA’s intervention was smaller than previous rounds of
liquidity withdrawal in 2018.
Outlook
Global economy is facing a deceleration with Eurozone and China being the most disappointing geographic areas, while US
remains as the healthiest economy. Recent economic data also suggested that US economy is far from recessionary levels which
may not warrant any monetary policy easing measures. Minimal inflation pressures should allow the Fed to remain “patient”.
Thus, we expect rates will likely to remain on hold for the remainder of this year given the hurdle for the Fed to cut or to
hike rates is relatively high. US Treasury will likely engage in a range trading mode with short to medium part of the curve
anchored by the Fed Fund rates.
In Hong Kong, we expect short term Hong Kong rates would become more volatile given Aggregate Balance has decreased
to close to HKD 50 billion after several rounds of HKMA’s interventions in 2018 and 2019. This implies a relatively smaller
buffer to smooth any liquidity mismatch. Looking at the HKD space, we believe the HKD-USD peg should stay solid for the
foreseeable future.
8