Mutual fund schemes that invest in Chinese markets have delivered strong returns over the last year. According to recent data, some of these funds have given up to 53% return in just 12 months. That means an investment of ₹1 lakh would now be worth over ₹1.5 lakh.
This sharp rise is mainly due to strong performance in the Chinese and Hong Kong stock markets. The Shanghai Composite Index and Hang Seng Index have gone up significantly, while Indian indices like the Sensex and Nifty have shown much smaller gains.
China’s Stock Market Shows Signs of Recovery
After facing pressure for the last few years, the Chinese economy has started showing positive signs. The government and central bank of China took several steps to support economic growth, especially in the real estate sector, which was badly hit during the COVID period.
These reforms are now showing results in the stock market. Global brokerage houses like Angel One have said that Chinese markets are looking attractive again for investors.
These 4 Mutual Funds Gained from China’s Rally
Indian investors have limited options to invest in Chinese stocks through mutual funds. Currently, only four schemes invest in the Greater China region, which includes China, Hong Kong, and Taiwan.
Here’s how they performed in the last one year:
- Mirae Asset Hang Seng Tech ETF – 53.3%
- Nippon India ETF Hang Seng Bees – 43.4%
- Edelweiss Greater China Equity Off-Shore Fund – 19.9%
- Axis Greater China Equity FOF – 17.2%
These returns clearly outperformed Sensex and Nifty, which grew around 6% in the same period.
Long-Term Returns Are Still Average
If we look at 3-year performance, the average returns from China-focused mutual funds are much lower. For example, Nippon India ETF Hang Seng Bees has a 3-year CAGR of only 9.3%.
This is because Chinese markets struggled between 2021 and 2023. Reasons included:
- Falling property prices
- Impact of COVID-19 lockdowns
- Low global demand for Chinese exports
- Slow economic recovery post-pandemic
Now, as the economy gains momentum again, mutual funds are seeing the benefit.
Can You Still Invest in These Schemes?
You can still invest in Axis Greater China Equity Fund and Edelweiss Greater China Equity Offshore Fund through SIP or lump sum.
However, Mirae Asset and Nippon India mutual funds are currently not accepting fresh investments due to SEBI’s overseas investment limits.
Indian mutual funds can invest only $7 billion in foreign equities. Within this, only $1 billion can be in foreign ETFs. These limits are already near full, which is why some AMCs have paused new inflows.
Things to Keep in Mind Before You Invest
- China-focused funds are high-risk. Their performance depends on policies, regulations, and market conditions in a foreign country.
- Returns can be volatile. The same funds that gave 50% in one year also gave low or negative returns in previous years.
- Limited options. Only a few mutual funds invest in China.
- Overseas limits can restrict investments. AMCs may stop accepting new money when limits are reached.
- Tax treatment. These are treated as debt funds for taxation purposes, not equity funds.
Should You Consider Investing?
If you are an investor with high-risk tolerance and a diversified portfolio, adding a small portion to a China-based fund can help you benefit from global growth trends. But make sure to study the fund’s past performance, fund manager details, and market outlook before you invest.
