Greeting To Our Readers! 

Mutual Fund Schemes investing in Chinese Stock Markets and the Greater China region, saw a good fall in their performance last week. Experts believe the reason behind the downfall is the recent volatility in Chinese stock markets.

As soon as the funds got affected, investors out of panic started to sell their investment, resulting in a sharp fall in NAV. If we look at the fund's performance then:

• Edelweiss Greater China Equity Off-shore fund of fund (FoF) was down 4.16 percent on Monday that is 26^th July 2021.
• The NAV of Axis Greater China Equity FoF fell 2.95 percent on Tuesday that is on 27^th July 2021.

Experts say the downfall experienced by the Chinese stock market is due to the regulation imposed on technology giants by Chinese government agencies and more recently disallowing foreign capital in after-school tutoring companies.

The point of discussion here is what should investors do with their funds investing in Chinese Stock Markets!

Let us see.

How Long Will This Volatility Last? 

Experts say that the motive of Chinese government policy was much clear after the limitation was put on tech giant, Ant Financial (Alibaba Affiliate Company). Further, they said, currently the funds that invest in Chinese stocks have their major allocations in traditional sectors such as electrical equipment manufacturers, rather than new-age tech companies.

Experts undoubtedly sensed regulatory troubles around Chinese tech companies, thus deciding to follow this kind of allocation strategy.

How Could This Be Taken As An Opportunity? 

Edelweiss Mutual Fund has the largest asset allocated in China-linked fund in India, with a total asset size equal to Rs 1,844 crore. They believe that the regulatory changes by the Chinese government are transitory, and thus it can be taken as an opportunity.

The Edelweiss Mutual Fund Team says, “The regulatory regime currently facing the China internet space is creating short-term headwinds, which may continue for some time. But it is believed that these pressures will ultimately prove to be transitory. The regulatory overhang shouldn’t negatively impact important corporate strengths such as innovation and entrepreneurship”.

They further added that in the coming future, chances are, to fix certain areas of regulation, the Chinese government may take steps that would basically open certain excesses, for tech companies and will let them take advantage of the power market.

Let Us Sum Up! 

Experts say, it's completely not the right decision to take off your money from such funds just because of current volatility, because these are similar to equity funds, that suffer from short-term volatilities.

Well, here you need to consider one thing and must make changes as per that. If you have investments, in funds investing in Chinese stocks, consider this as the international equity exposure of your portfolio.

As a general suggestion, a 10-15 percent investment in international equities is desirable, but it should not be more than this. This can make your investment risky, thus avoid investing more than this in International Fund!

Keep reading our article and stay updated with the latest news about Mutual Funds!

For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).