Domestic investors' Chinese bets turn sour as Evergrande weighs

Two China-focused funds are down 11% in the past three months. In comparison, Sensex has gained over 12% during the same period

Domestic investors have been increasingly investing in overseas stocks in a bid to diversify their portfolio. US stocks are the favourite for individual investors, though they have been increasingly looking at Chinese equities given the relatively attractive valuations. However, the regulatory crackdown in China and the latest concerns around Evergrande default have resulted in sub-par returns for investors. Edelweiss Greater China Equity Off-shore Fund and Axis Greater China Equity Fund of Fund are down 11 per cent in the past three months, the data from Value Research shows. In comparison, the Sensex has gained over 12 per cent during the same period.

Edelweiss Greater China Equity Offshore Fund is an open-ended fund of fund scheme investing in JPMorgan Funds - Greater China Fund. While Axis Greater China Equity FoF is an open-ended fund of fund scheme investing in Schroder International Selection Fund Greater China.

Amid concerns over exposure to Chinese equities, Edelweiss MF issued a note saying the troubled real estate player Evergrande is neither held by the JPMorgan Greater China Fund nor in any of the JPMorgan Emerging Markets or Asia funds.

“The government is prioritising economic and social stability, so recent regulatory developments were expected with that key objective in mind. Recovery in China has been on track, particularly in the manufacturing sectors. The fund’s stock picking remains fundamental and bottom up, expected returns are certainly more attractive now than they were at the start of the year for Chinese equities,” said the note by Edelweiss MF.

Notwithstanding the problems facing China, the returns for the international funds category have been attractive over a one-year period at 23.6 per cent.

Edelweiss Greater China Equity Off-shore Fund has given one-year returns of 13.5 per cent, shows the data from Value Research.

Officials in the MF industry say that investors having a long term horizon should stay put as the volatility in Chinese markets is transitory and the stocks there hold good long-term potential.