'Bullish On Power Sector For At Least 3 Years' : Naveen Chandramohan On The Talking Point

Summary

The video discusses the volatility in Indian stock markets, focusing on sector and market cap rotation amidst rising geopolitical tensions. Naven Chandran, founder of Itis Capital, shares insights on managing risks, large caps, and sector performance, particularly highlighting the power, pharma, and non-lending financial sectors. He emphasizes the importance of balancing portfolios and sectors like power and renewables. The discussion also explores investments in Chinese and Hong Kong stocks through ETFs and mutual funds, advising caution and diversification. Viewers are encouraged to consider international exposure while managing risks.

Takeaways

• 📉 The markets are oscillating between gains and losses, with a possibility of forming a base.
• 📊 Despite the market volatility, certain sectors like power, oil & gas, consumer durables, and auto are performing well.
• 💡 Sector rotation and risk management are crucial for maintaining returns in the current market environment.
• 🏦 Large caps, especially banks, may not be the most favorable due to potential weaknesses in RoA expansion.
• 💼 Reliance Industries is seeing a drag on its stock due to the retail business, despite strong performance in its energy and telecom sectors.
• 💊 Pharma is showing growth potential, with a focus on sectors like generics, branded portfolios, and CDMO.
• 🏛️ The banking sector is not showing significant RoA expansion, making other sectors potentially more appealing for returns.
• ⚡ Power stocks, especially companies like NTPC, are poised for growth due to India’s transition to a manufacturing economy and the increased demand for power in sectors like AI and data centers.
• 📈 Investors may benefit from diversifying portfolios into Chinese and Hong Kong markets through mutual funds and ETFs.
• 🌍 Investors are advised to use Chinese markets as a diversification tool, not as a primary investment focus, due to the higher risks involved.

Q & A

What is the current state of the market as discussed in the video?

The market is volatile, oscillating between gains and losses, and has dropped about 4% from its recent highs. However, certain sectors like power, oil and gas, consumer durables, and auto are still doing well.

How does the guest, Naveen Chandran, view sector rotation in the market?

Naveen Chandran believes that sector rotation is crucial in the current market environment. While overall corrections are expected over the next 6 to 12 months, certain sectors such as small caps, power, and oil and gas continue to perform well. He emphasizes the importance of risk management and positioning in this environment.

Why is Chandran cautious about large-cap stocks despite their risk-reward potential?

Chandran is cautious about large-cap stocks because of the significant sectoral differences within them. He highlights that Indian large-cap stocks are heavily weighted towards banks, which he has been underweight on for four to five quarters. He is more optimistic about non-lending financials like insurance, power, and oil and gas rather than banks.

What is the main challenge facing Reliance Industries according to Chandran?

Chandran points out that while Reliance Industries’ core businesses like energy and telecom are doing well, its retail business is causing a drag on the company's overall return on equity (ROE). This drag has kept the stock from performing strongly despite solid earnings from other verticals.

What are Chandran’s thoughts on the Pharma sector, and where does he see value?

Chandran sees value in Pharma, particularly in companies with a mix of U.S. generics, India-facing branded portfolios, and CDMO (Contract Development and Manufacturing Organization) businesses. He believes that after years of a down cycle in U.S. generics, the environment is improving, and there is potential for margin expansion and M&A activity.

Why has Chandran been underweight on banks, despite positive credit growth in the sector?

Chandran has been underweight on banks because he does not see the credit growth translating into sufficient return on assets (ROA) expansion. While credit growth has been strong, he is concerned that this will not result in an ROE improvement from 16% to 18%, making him cautious about banking stocks.

What are Chandran’s top investment areas outside of banks?

Chandran favors sectors like non-lending financials (especially insurance), Pharma, auto (two-wheelers), and power. He believes these sectors offer better growth prospects and has positioned his portfolio accordingly.

Why does Chandran see power as a key sector for long-term growth?

Chandran believes that power is essential for India’s transition to a manufacturing-driven economy and the growth of data centers and AI-led industries. He prefers companies with a balanced portfolio of thermal and renewable energy, such as NTPC, to capture growth opportunities in both segments.

What are the investment options discussed for Indian investors wanting exposure to Chinese stocks?

Indian investors can invest in Chinese stocks through mutual funds like the Edelweiss Greater China Fund, ETFs like the Nippon India ETF Hang Seng Bees, or by directly buying Chinese stocks listed on foreign exchanges through brokerages like Zerodha.

What advice is given to Indian investors considering investing in Chinese markets?

Investors are advised to view Chinese market investments as diversification tools rather than core holdings. A small allocation of 5-8% of their portfolio could be dedicated to Chinese and Hong Kong stocks, but these investments are considered high risk due to geographical and market-specific factors.

Outlines

00:00

💼 Market Volatility and Sector Rotation Insights

The speaker discusses the volatile nature of the stock market, particularly on D-Street, with markets fluctuating between gains and losses. He speaks with Naven Chandran, founder of Itis Capital, about the impact of geopolitical stress and the potential for further correction in the markets. Naven highlights the importance of risk management and sector rotation, noting that while markets are down, certain sectors like small caps, power, oil and gas, and consumer durables continue to perform well. He emphasizes the need for careful positioning in these uncertain times.

05:00

📊 Insights on Reliance and the Oil & Gas Sector

The discussion shifts to Reliance Industries and the oil and gas sector, with Naven pointing out that while Reliance has strong businesses in energy and telecom, the retail business is dragging on overall performance. He mentions that the company’s growth triggers, particularly in new energy, have been delayed. Naven also comments on the sensitivity of the oil and gas sector to crude prices, noting that companies like OMCs may see volatility, while O India could continue to gain.

10:04

💊 Pharma Sector Outlook and Investment Strategies

Naven expresses bullish views on the pharma sector, despite the Nifty Pharma Index trading at a high P/E ratio. He explains the potential for growth in both US-facing generics and India-facing branded portfolios, along with the rising importance of CDMOs (Contract Development and Manufacturing Organizations). He also discusses the potential for M&A activity in the sector, driven by strong balance sheets and cash positions. Key stocks include S Life Sciences and P Farm within the CDMO space.

15:04

🏦 Banking Sector: A Cautious Outlook Despite Strong Credit Growth

The conversation focuses on the banking sector, where Naven explains why he remains cautious. Despite strong credit growth, he does not see it translating into higher returns on assets (RoA) for banks, leading him to keep a lower exposure to the sector. He emphasizes the need for RoA expansion to justify higher valuations and expresses concerns about the potential for earnings growth. However, he does not rule out opportunities in the sector if these conditions change.

20:05

⚡ Bullish on Power: A Sector Positioned for Long-Term Growth

Naven discusses the power sector, expressing a bullish outlook due to its importance in India’s economic transition from services to manufacturing. He highlights the increasing demand for power driven by data centers and AI-driven economies. While both thermal and renewable energy are expected to grow, Naven prefers companies that have a balanced portfolio of both, such as NTPC. He stresses the importance of balancing topline growth with return on equity (RoE) in the sector.

💡 Top Investment Picks Across Sectors

In closing, Naven shares his sectoral picks for future investments. He focuses on non-lending financials, particularly insurance, along with pharma, auto (two-wheelers), and power. Naven advises investing in market leaders within these sectors and reiterates the importance of positioning in high-growth areas. He remains confident in these sectors and plans to increase allocation during any market corrections.

🌏 Investment Opportunities in Chinese and Hong Kong Markets

The speaker shifts focus to international markets, particularly China and Hong Kong, which have seen significant growth recently. He explains how Indian investors can diversify their portfolios by investing in Chinese stocks through mutual funds, ETFs, or foreign brokerages. Funds like the Edelweiss Greater China Fund, Nippon India ETF Hang Seng, and Mirae Asset NYSE FANG+ ETF offer exposure to these markets. He advises caution, suggesting that these investments be treated as diversification tools rather than core holdings.

Keywords

💡Sector rotation

Sector rotation refers to the shifting of investments from one industry sector to another based on anticipated changes in market conditions. In the video, Naveen Chandran discusses the importance of sector rotation in the current volatile market, emphasizing that while some sectors are doing well, others are struggling, making this strategy crucial for managing risk.

💡Market cap rotation

Market cap rotation involves shifting investments between companies of different sizes, such as large-cap, mid-cap, and small-cap stocks. The video addresses how large caps have come under pressure despite their previous strong performance, while small caps continue to do well. Chandran mentions the need for selective investment strategies based on company size in the current market environment.

💡Risk management

Risk management is the process of identifying, assessing, and controlling threats to an investment's value. Chandran highlights the importance of risk management, especially during market corrections, where protecting the downside becomes critical. He emphasizes that investors should focus on minimizing risk rather than just chasing returns.

💡Reliance Industries

Reliance Industries is a major conglomerate in India with diversified interests in energy, telecom, and retail. In the discussion, Chandran mentions how the company's share price hasn't moved significantly due to underperformance in its retail business, despite strong cash flows from its telecom and energy businesses. The challenges in retail are seen as a drag on overall shareholder returns.

💡Pharma and healthcare sector

The pharma and healthcare sector includes companies involved in the research, development, production, and distribution of drugs and healthcare products. Chandran discusses being overweight on this sector, citing its recovery from a down cycle and strong prospects for growth, especially in Indian branded generics and CDMO (Contract Development and Manufacturing Organizations).

💡ROE (Return on Equity)

ROE is a financial ratio that measures a company's profitability in relation to shareholders' equity. Chandran discusses the importance of ROE, particularly in the context of Reliance Industries and the banking sector. For banks, he expresses concerns over the lack of ROE expansion despite strong credit growth, which impacts long-term valuations.

💡Credit growth

Credit growth refers to the increase in the total amount of credit in the financial system, which is a key driver of economic activity. The video highlights how Indian banks have seen strong credit growth, yet Chandran remains cautious about investing in banks, as he does not see this translating into an improvement in ROA (Return on Assets) or ROE.

💡Power sector

The power sector involves companies engaged in the generation, transmission, and distribution of electricity. Chandran is optimistic about the power sector, emphasizing that it is critical for India's economic growth, especially in transitioning to a manufacturing economy. He mentions NTPC as a key stock in this sector, benefiting from both thermal and renewable energy growth.

💡Renewable energy

Renewable energy refers to energy derived from natural resources such as wind, solar, and hydropower, which are replenished naturally. The video touches on the importance of renewable energy in India's power sector, with investments in this area growing significantly. However, Chandran notes that despite this growth, renewable energy companies may struggle with ROE expansion.

💡FII (Foreign Institutional Investors)

FII refers to investors or investment firms from outside a country that invest in its financial markets. The video mentions how FIIs have been reallocating funds from Indian markets to Chinese and Hong Kong markets, causing concern among Indian investors. This shift has been significant in recent days, contributing to volatility in Indian markets.

Highlights

Markets have been volatile with significant oscillation between gains and losses, with the Nifty index only 4% lower than recent highs.

Sector rotation is playing a significant role in the current market environment, with sectors like power, oil and gas, consumer durables, and autos showing strong performance despite the overall market downturn.

Small caps continue to perform well due to structural advantages in India, such as improved Return on Equity (ROE) for industries, not seen in over 15 years.

The importance of risk management in volatile markets is emphasized, with a focus on protecting the downside during market corrections.

Market-cap rotation: Despite the prior belief that large caps offered better value, they have been sold off during the current market stress, especially in the banking sector.

Reliance Industries' retail business is dragging on its overall ROE, despite strong performance in its energy and telecom divisions.

Pharma and healthcare sectors are showing value, especially for companies with both US and India-facing portfolios, and there is an expectation of increased M&A activity due to clean balance sheets.

Specific Pharma picks include Indian generics like Syngene and CDMO players such as PI Pharma.

Concerns around banking sector growth, with doubts about ROE expansion, even though credit growth remains strong.

Power sector is undergoing a major shift, with renewables playing a larger role, but thermal power still being essential for India's energy needs.

NTPC is a key pick in the power sector due to its balanced exposure to both thermal and renewable energy sources.

Despite the current underperformance in Indian markets, there are ways for investors to diversify into Chinese and Hong Kong stocks, which have shown significant growth recently.

Investing in China and Hong Kong can be done through mutual funds, ETFs, or foreign brokerages.

Top China-focused ETFs include Edelweiss Greater China Fund and Nippon India ETF Hang Seng BeES.

Advisors recommend that Indian investors diversify 5-8% of their portfolios into Chinese stocks for diversification purposes.

Transcripts

[Music]

hello and welcome you're watching

talking point it's a volatile Friday on

D Street uh the markets are osculating

between gains and losses but it seems

like a little bit of a base could be

made for the day uh well you're now

watching talking point in m alvala and

you of course we are now going to be

talking to our guest for the day naven

chandran founder of itis Capital joins

in hi naen very good morning thank you

very much for joining us uh we're

talking to you on a day when the markets

have been tumultus the last few days

have been rough to say the least we're

off about 1,000 points my record highs

last week uh but when you quantify that

into percentage with only 4% lower than

our recent highs made on the Nifty uh

what I want to understand from you is

with the rising geopolitical stress how

much of that is already in the price or

do you anticipate another five to 10%

correction from these

levels so uh very good morning to you

and all your viewers thank you so much

for having me so as you said I think uh

we are off the highs but within that

there is a lot of sector rotation that

is currently happening as we speak so I

think uh what you're seeing for the

first time is uh while pretty much most

fund managers including myself are

positioned more so from the risk reward

not sacrificing liquidity uh the small

caps continue to do well and one of the

reasons for that is from a structural

perspective India is in a position not

not seen after 15 years where Roe as an

industry is expanding right so I think

while we can talk about corrections

being part for the course from here over

the next 6 to 12 months I think risk

management and positioning becomes

extremely important so what do I mean by

risk management is how do you ensure

downside is protected during every such

fall because even today uh when your

markets are off the highs you still have

power doing well oil and gas doing well

you still have consumer durables doing

well Auto two-wheeler doing well so end

of the day it's not like uh every sector

is going through volatility you still

have pockets doing well as a result of

which which is what I'm talking about

sector rotation going to be increasingly

important from here

and I mean you're right I mean at the

end of the day returns are a function of

the markets and the only thing we can

really do is manage the risk and that's

pretty much critical you know you talked

about sector rotation but I want to talk

about market cap rotation uh from mid

last year towards the end of last year

most people were propagating that the

value remains in the large capap space

and that's where portfolio biases should

be but at the first sign of stress which

we've seen in the last four to five days

large caps that had began a rally have

already gotten sold into do you feel

like a sustainable recovery in large cap

names is a far cry even though they do

have a better risk reward at this

stage absolutely so I think that's a

great question that you ask and it's

very important to classify large caps

right because India large caps is one of

the most Diversified sectors in the

world with a bias towards Banks now if

you look at our portfolio we've been

underweight banks for a good part of

four to five quarters and I continue to

maintain that stance so for us large

gaps does not mean Bank heavy uh though

valuation wise it looks cheap and

reasonable I still uh worry about a bit

more on the Roa expansion side and the

quality of growth may have a bit more of

two to three quarters to see especially

from an unsecured Landing perspective

where I'm talking about from a large

scale perspective is a mix across farma

non-lending financials predominantly

dominated by Insurance power oil and gas

these are the places where I see

sustainability of growth and that's

where we would position ourself towards

so a broad basing of just moving from

small cap to large cap without giving

context of how you want to position

yourself I'm not sure is a a blanket

statement that I would like to make

here you know n correct me if I'm wrong

but you mentioned oil and gas let's

start with Reliance Industries uh the

last 4 days it's been a key contributor

to the nifty's downside there's a report

out by ambid that says that the growth

triggers of its new energy have been

delayed uh there's delays on

monetization there's delays across the

board AC through its different verticals

as well how do you feel about that do

you feel like a lot of the good news for

R is in the price and the stock hasn't

done much even though it has Superior

uh earnings in that sense that was an

ril question and also beyond ril the oil

and gas pack seems to be so so sensitive

to what's happening to crude prices do

you feel that stocks like OMC in O India

could continue to gain but omcs may once

again go back on the sell side sure so

first coming to Reliance unfortunately

Reliance uh underneath the balance sheet

are multiple businesses that is just not

Oil and Gas and energy dependent right

so you still have the core energy

business which I think should do well

and you still have the Telecom business

where you will have to take a view on

when the uh the Demmer is going to

happen maybe it's going to be five to

seven quarters away but that continues

to be a very good cash C because Telecom

as a sector is in an upcycle the issue

From reliance's perspective what you're

talking about where the share price is

not done much comes from the retail

business so any end of the day for you

to generate shareholder IR you need Roes

to aggrade and retail business has cost

a drag on the Roes for a good part of

two and a half three years so unless and

until you see the retail business

picking up you are going to have a drag

from a Reliance perspective so you have

two businesses which are actually doing

well from a cash flow a creative

business both of these underlying

businesses are growing their cash flows

at almost 16 and a half% but Reliance

retail is causing a drag on the R so

cumulatively while you see a console

level growth of 12% which for Reliance

is higher than mean there is a drag on

one of the core businesses so that drag

has to actually get overcome for you to

have an IR upti from

here so it's not going to be purely

energy dependent is what I'm saying

right let's talk about the Pharma pack

and I know you're overweight on that

because you indicated that to me

yesterday but the overall farm and

Healthcare pack seems to be or more or

less fully priced in for growth

opportunities that these sectors offer I

mean Nifty Pharma index trades is a p of

38 how do you feel do you feel there's

value in the farm and healthare pack and

if yes any specific Pockets where you're

adding incremental Capital

to so uh for us when you look at Pharma

and you take a slightly zoomed out

perspective right from 2015 to 2022

you've been in a farma down cycle

specifically driven by us generics you

had uh not price inflation but the rate

of change of price deflation come down

predominantly because a lot of the US

manufacturers have filed for bankruptcy

as us cost of capital is gone up so the

macro is in favor for volume growth to

happen for us facing businesses and many

of these businesses have also

Diversified their product portfolio with

an Indian faing Roe or creative

businesses so for us our portfolio is

across generics it's across businesses

with an India facing branded portfolio

and cdmo and we still see a lot of value

in these three Pockets so uh

predominantly from a large gap

perspective we have businesses which

have Diversified us and India portfolio

and in the mid and small cap space our

portfolio positioning is more so towards

cdmo popular

and you rightly point out that there is

been some level of reating in Pharma

from let's call it a year back many of

these businesses used to trade at

roughly 40% uh of the PE that we just

spoke about but as long as growth comes

in but more importantly margin expansion

happens because some of these businesses

that I'm talking about that net cash to

market cap is roughly at 6 and a half%

and the last time I saw this was rough

was around 20145

so what you're going to see in the next

two years is an increased m&a pickup

because the balance sheets are clean

cash appre is real and you're going to

see m&a pickup so from here the quality

of m&a in terms of capital allocation is

going to decide future returns so that's

where bottom up is going to be important

purely from a capital allocation

perspective but we continue to be

bullish yes across glob and local

players your top two or to three bets in

the sector naen at the current juncture

and the current valuations and of course

also ahead of earning

season in the Pharma

pack so uh I mean leaving I mean we have

roughly seven names in terms of farma uh

amounting to almost 20% of our portfolio

so if uh like I said we are bullish

across Indian branded gencs there we

have a portfolio exposure in a company

called s life sciences and in terms of a

Rec story within the cdmo back we like P

farm right naen you know when you

indicated to me that you're one of the

few PMS uh uh advisers of fund managers

who actually hasn't been too bullish on

banks uh I had to stand up and take

notice credit growth for the banking

space has been in the range of 13.7 to

13.6% over the last 2 months and that

makes me believe that the earnings

downgrade from year is rather limited uh

but there is a potential for an upside

only because there are large capacities

to lend to as well do you agree do you

feel like it's a matter of time and you

may turn constructive of banks or would

you avoid Banks uh for now at least no I

agree with the entire hypothesis that

you laid out I think the credit growth

is likely to be strong from here uh what

I am not confident of is this credit so

in the previous cycle between uh let's

call it 321

our financial exposure coming

predominantly from Banks was on average

40% of our portfolio so it's not like

we've not been overweight banks in the

past where why we've dropped our banking

exposure to as low as 3 and a half%

today is this credit growth is not

according to me translating into Roa

expansion see one of the reasons if you

take a step back and we look at Indian

banking at a price to book of 2 to 2.1

being cheap versus Global benchmarks is

because our roas are roughly 2.2 times

that of global benchmarks now in an

environment where I don't see Roa

expansion in an accretive way what that

means is my Roe which I was used to at

18 to 20% drops to 16% and this Roe

unless and until I see it go back to an

18% number I don't know the price to

book if 2.1 is cheap or not from 10 your

perspective it does look cheap and hence

there is value like you rightly pointed

out but my incremental IR has to come

from an Roa expansion which is not where

I'm confident of so I'm not saying I'm

bearish banking but from an opportunity

cost perspective I still see there are

better pockets of growth it doesn't mean

we will not look at Banks but unless and

until I see an environment where I know

Roa can agreed I'm not going to go over

BS you know what are you doing with

power stocks there so much changing for

the power sector I mean in some ways

it's going through a tactical or

tectonic shift right with renewable

energy generation transmission being

prioritized over traditional thermal

energy uh shorter gestation period in

some ways better earnings reduced

exposure to CR coal price uh with the

likes of a prow grid they're expecting

nearly 2 trillion rupees in capital

expenditure so very ambitious plans as

well and while momentum could have taken

a hit fundamentals are still strong uh

your top uh bet in the power pack and uh

would you play

Power significantly between now and the

next 6 months and keep adding to any

sort of adding your allocations if

there's any weakness sure so if I take a

pre- viiew right one sector that I would

like to stick my neck out and say that

we are bullish on is power uh no matter

how we look at it if India has to

transition from a slightly more services

economy to a manufacturing economy

the backbone of that has to be P at the

same time if we have to increase our GDP

that has to transition with the power

capex expansion and more importantly if

we believe the data center story is real

and globally we are going to be talking

from a mobile first economy into an AI

Le economy there again you need power so

no matter whether I look at compute

whether I look at manufacturing or data

center Le economy the backbone of all of

this is power which we have have been

underinvested for a good part of 10

years the globally right and India one

of the reasons we are in a better off

position is we never said no to Thermal

right so I think what you're going to

see is growth in thermal annualizing at

around 12 to 14% growth in Renewables

including nuclear going much higher at

18 to 24% but the problem is today

renewable growth does not mean Roe

expansion so what I would like to play

Within power is a portfolio mix of a

company which has the capability of

doing thermal and renewable alongside so

our largest exposure there is in a PSU

with ntpc so that is where I would

continue to look at I would not

preferably look at a Renewables only

player because you might get incredible

Topline growth but I'm not sure that

translates into an RO expansion so I

think I would want to balance out the

two and as you as you rightly nailed it

in terms of of power kex does not

incrementally translate into demand ACC

creation unless and until you have the

transmission layer sorted out so the

transmission lay layer legs also has

room to

expand I wish we could chat longer but

one last question before I have to wrap

up this conversation three to four

stocks across sectors across market cap

that is on your watch list and you would

use the next uh say 5 to 10% correction

to increase allocation to

stocks so more than names I think I'll

lay out the sectors right and um the way

we think about this mostly we go after

market leaders in any of these sectors

so I spoke about non- lending insur non-

lending financials uh there we continue

to be overweight insurance insurance

continues to be one of that uh in our

top five uh you would see the stock

actually figure in uh we continue to

like Pharma uh there again we are

incremental bi

uh if there if there is a de then third

is auto two- wheer uh there again we own

the uh the market leader they continue

to execute uh and uh fourth I spoke to

you about power so uh these are the four

sectors we continue to be bullish on and

that's where we would continue to add

risk at every given opportunity right

exciting thank you naen so good talking

to you and getting a perspective from

you your fund of course has beaten the

index in the last one year and over a

longer period of time as well then that

of course means that everything you say

our viewers will be taking very

seriously thank you nine have a great

day and we'll see you

soon well uh the big big story over the

last few days has been about how FIS

have been rebalancing their portfolios

and moving allocations or incremental

flows into the Chinese and Hong Kong

stock markets those markets for good

reason have actually done phenomenally

well over the last few days China for

example is up 30% in the last 13 trading

days while China as well has had a

phenomenal run over the last few days

well while you're an investor who's

swindling your thumbs and getting

disappointed and worried about the fact

that Indian markets are selling off on

back off this money moving to China do

not be too disappointed because as an

Indian sitting in India you can actually

diversify your portfolio to make

allocations to Chinese stocks now let's

take you through how you can do it there

are a few ways in which an Indian

investor can actually invest in stocks

outside a country first up you can

either do it through mutual funds or you

can do it through ETFs I'm going to

start by taking you through uh which are

the ETFs and which are the China focused

funds that you could invest in let's

start with edwise greater China fund now

this is a fund that focuses largely and

has a major chunk of its Investments

made in China Hong Kong and Taiwan which

is more popularly known as greater China

this is a fund of fund so what this fund

does does is it doesn't invest directly

into these markets but it invests in the

JP Morgan greater China fund so it's a

fun of fund vehicle with the elwise

greater China fund is investing in the

JP Morgan fund the returns of this one

have been good on the in the last one

month it's done about 3% 3 month return

is about 13 1.5% and onee return is

largely what the Nifty has done with a

return of over 20% for China and Hong

Kong at a time when those markets have

been underperforming the other way to

invest in China and Hong Kong is to do

it through ETFs this is a very popular

mechanism it's a lowcost instrument and

the way you do it is that you buy into

the nipon India ETF hansing bees ETF

tracks the Hong Kong index uh pretty

much with a very little with the usual

tracking ER so not too much in terms of

what Hong Kong does this is a passive

fund which means that if the Hong Kong

index goes up the nipon ETF which

invests in this Hong Kong uh bees also

goes up the returns of this one have

been pretty solid and in line with what

the hand say itself is done in one year

it's done returns of 22% in 3 months

it's done about 3 %. so if you only want

to play Hong Kong which is an ancillary

of China this and through a lowcost

liquid instrument this one becomes a

good way to do it the other one to do is

U the midi asset uh NYSC Fang plus ETF

now what this uh is it invest in those

in the Fang stocks which is Facebook uh

and amongst others the stocks that are

listed on the NASDAQ but what it also

does is has some exposure to Chinese

tech companies so companies like Alibaba

and ten tensent are present in the NYSC

fank mutual fund so again this may not

just be China focused but a small

allocation of this fund does make

investments into Chinese and Hong Kong

stocks the returns have been great but

that's not driven by the performance of

Chinese stocks it's been driven by how

well the NASDAQ has performed this year

the stock the index of course is up

about 54% what you also want to keep in

mind is while these are uh some the

funds that are available and ETFs that

are available to invest in the Chinese

and Hong Kong stocks a few other ways to

do so is to do this through foreign

brokerages so if you have a zero the

account and you have a good

understanding of Chinese and Hong Kong

stocks you can simply register on these

platforms and go out and buy specific

companies that are listed in China and

Hong Kong the other way to do this is

you can also buy into the New York Stock

Exchange a couple of the Chinese larger

tech companies are listed on the New

York Stock Exchange on the NASDAQ and

the nysa so that's largely how you could

make hay while the Chinese markets are

witnessing or experiencing or set to

experience an outperformance from year

on but couple of things you want to keep

in mind These funds are high risk

remember there is no uh home home buyas

here so obviously what happens over

there uh you are slightly disconnected

with so it might be tough to get a pulse

of the market since we not living in

China and Hong Kong you should consider

this as a diversification instrument so

don't go out there there and bet the

house on these funds but off your

portfolio talk to your adviser maybe a 5

to 8% allocation to Chinese and Hong

Kong stocks could be a good idea for now

so those are a few ways of how you can

take advantage of the rally that's

expected across Chinese and Hong Hong

Kong

stocks with that completely out of time

thank you for watching

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