China attractive, but investors be aware: Experts
Chinese equities and outsized stimulus measures have led many investors to believe the Chinese market offers an attractive entry point. But financial planners are asking savers to be careful.
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Of the four available funds that give exposure to China, a couple are exchange traded funds (ETFs) that trade at a premium of 8-16% of their net asset value (NAV). Buying mutual fund units at a premium will eat into their returns when the excitement in Chinese equities dries down and the exchange price and net asset value converge.
«We currently cannot create and supply fresh units in our international ETFs as our limits are exhausted in line with the restriction on international funds by Sebi. Given the higher investor demand, where new supply is unavailable, units are trading at a premium,» says Siddharth Srivastava, head — ETF Products, Mirae asset mutual fund.
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The RBI regulates the fund inflows and outflows and currently there is an overall industry level limit of $7 billion for mutual funds to invest overseas with an additional $1 billion for ETFs.
A correction and redemption in few schemes, led to cumulative investments made by international MF schemes coming down and based on this, the regulator again allowed inflows, making few fund houses accept investments.
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