By Sanchari Ghosh
Indian Mutual Funds that invest in China and the Greater China region have been vastly affected due to the recent volatility in Chinese stock markets. Panic selling among investors has resulted in a sharp fall in NAV for such funds.
The sell-offs were led by regulatory actions against the country's tech giants and more recently, a crackdown on Chinese private education companies.
However, Edelweiss MF, which runs the largest China-linked fund in India, says that the 'short term volatility has opened long-term valuation opportunities'.
In fact, the fund house suggests that "investors who have spare cash should invest more and build their positions further in the fund."
Here is why Edelweiss MF is looking at it as an opportunity?
In a recent note, the fund house explains, although there’s uptick inactivity on the part of the Chinese tech regulators, it would be wrong to assume they are taking an indiscriminate hardline stance that will unduly penalize their technology giants.
Indeed, with the backdrop of escalating geopolitical rivalry between the United States and China, it would hardly be in the strategic interest of the Chinese government to punish their domestic champions, it adds.
Rather, what the Chinese government wants to see is a fair, well-functioning and resilient industry playing field, which can allow competition to thrive, the Edelweiss MF note says adding, "they do not want to dismantle their leading companies, but they do want to ensure that the next cohort of innovators has space to flourish."
"Broadly speaking, fund managers think that the regulatory environment is less opaque than some commentators suggest. For example, recent internet regulation has not been particularly different to the direction of travel in the West – except that perhaps Chinese regulators were behind the curve."
Many people assume that there is one universal approach to Chinese tech regulation. However, it’s believed that one should take a closer look in order to discriminate between different areas of regulatory focus – which in turn enables to distinguish between winners and losers, the note also said.
Investment advisor Sunil Jhaveri calls it an investment opportunity even in the current shake-up in China education companies.
In a tweet he adds, China Fund provides great Emerging Markets diversification at better valuations now with no exposure to these Education companies.
Edelweiss Greater China Equity Offshore Fund invests in companies based out of China, Hong Kong, and Taiwan.
The fund house says, "Investors with long term horizon are advised to stay patient as the fund managers see."
