Decoding Investment Opportunities In China Via Mutual Funds | MF Corner | CNBC TV18

Summary

The discussion centers on the recent boom in Chinese markets and how Indian investors can engage through mutual funds. The conversation features insights from experts Radhika Gupta of Edelweiss AMC and Feroze Aziz of Anand Rathi Wealth, who explore the opportunities and risks in China’s market. They also discuss long-term investment strategies, thematic sectors like AI, insurance, and carbon neutrality, and comparisons between China and India. Additionally, they touch on recent trends in mutual fund flows and the impact of foreign investments on both markets.

Takeaways

• 📈 The discussion centers around the recent boom in Chinese markets and how Indian investors can potentially benefit through mutual funds.
• 🌍 Radika Gupta mentions that the El's Greater China Fund, which has been around since 2017, has seen a surge in investor activity over the past two weeks.
• 📉 Despite attractive valuations, Radika advises against short-term tactical trading in China due to past experiences of brief rallies followed by downturns.
• 💼 Investors are encouraged to take a long-term approach to Chinese markets, which offer growth opportunities as the world's second-largest market.
• 🏢 The Chinese government is implementing measures to stimulate consumption, revive the real estate sector, and boost the equity markets.
• 🛠 Core investment themes in China include AI technology, insurance, carbon neutrality (including solar energy and electric vehicles), and real estate recovery.
• 🤔 Fose Aziz emphasizes that India and China, from a global standpoint, are seen differently and should not always be compared directly.
• 💡 India is viewed as a stable 10-year growth story, while China is seen as a more volatile but undervalued market with potential for turnaround.
• 🔄 The options for Indian investors to access Chinese markets include feeder funds, index funds, and ETFs, with specific funds like El's Greater China Fund and Access Greater China Fund.
• 💬 The panel also briefly touches on the withdrawal of FIIs from Indian markets in 2023, with a significant flow into small-cap stocks despite large exits from India overall.

Q & A

What is the main focus of the discussion in the MF corner special edition?

The main focus is on the recent boom in the Chinese markets and how Indian investors can potentially benefit from it, particularly through mutual fund investments.

How has the activity in China's markets changed recently according to Radhika Gupta?

Radhika Gupta mentioned that there has been a significant increase in activity in the China fund recently. Two weeks ago, there was little action, but the last week saw a frenzy of activity and a high level of investor interest.

What is Radhika Gupta's advice for investors looking at Chinese markets?

Radhika Gupta advises investors not to engage in short-term tactical trades in China. Instead, she recommends a long-term investment approach, as China offers a great value story with attractive valuations, despite its ups and downs.

How does Feroze Aziz view the India versus China debate from a global perspective?

Feroze Aziz believes that from a global perspective, India and China are not seen as direct competitors, though they may seem that way from an Indian standpoint. Globally, they are viewed as distinct markets with different dynamics and growth opportunities.

What themes does Radhika Gupta see as investment opportunities in the Chinese market?

Radhika Gupta identifies several key themes, including technology, insurance, carbon neutrality (such as solar and electric vehicles), and real estate, particularly linked to the anticipated revival of the real estate sector.

Why does Feroze Aziz recommend broader market exposure when investing in Chinese markets?

Feroze Aziz suggests that when investing outside of India, it's safer to focus on broader market indices or funds managed by specialists with local knowledge, rather than trying to pick individual sectors like tech, which can increase risk.

What are the three main ways for Indian mutual fund investors to gain exposure to Chinese markets according to Feroze Aziz?

Feroze Aziz highlights three ways: (1) Liberalized Remittance Scheme (LRS) for large investors, (2) feeder funds like the Edelweiss Greater China Fund, and (3) ETFs that track indices like the Hang Seng.

What has been the performance of the Edelweiss Greater China Equity Offshore Fund over the past few years?

The Edelweiss Greater China Fund has underperformed in recent years, with a compounded return of minus 13% over the last three years, indicating that the market is in a trough, potentially presenting a value opportunity for long-term investors.

What are the key differences between how global investors view India and China?

Global investors view India as a stable, long-term growth story with strong demographics, while China is seen as a more mature market with cheaper valuations but higher uncertainty. Investors may adjust their allocations between the two depending on their risk tolerance and objectives.

What does Radhika Gupta suggest is the role of diversification for Indian investors looking at international markets like China?

Radhika Gupta suggests that diversification is essential for Indian investors. While the Indian market is strong, adding exposure to markets like China or the US can help balance performance during times when India may not perform as well. This diversification reduces risk and enhances long-term investment stability.