Vietnam Funds Down, India Funds Up: How to Invest?

In the first half of this year, a QDII fund, Tianhong Vietnam Market, performed exceptionally well. However, many investors who bought in after June found themselves trapped, with the value having dropped by 10%. If we can no longer invest in the Vietnamese market, which other Asian stock markets are worth our consideration?

India might be a good choice.

It is projected that the smartphone shipments in India will reach 170 million units this year, with 100 million units expected to be sold in the second half of the year, setting a new historical record for India. We can also observe that since the pandemic, India's economic recovery has been quite robust. Since June of this year, India has lifted its pandemic control measures, and consumer spending growth in the second half of this year should be promising.

01

Overall, the Bombay Stock Exchange SENSEX 30 index has been on an upward trend. Although there have been some dips along the way, they have not lasted long and the magnitude has not been significant. The SENSEX 30 index fell between 2007 and 2008, but this was a global trend, and by 2010, it had returned to its previous high. Although there have been a few minor pullbacks since then, each time it has reached a new high.

One of the more significant dips occurred last March, following the four熔断s in the United States, which led to a substantial decline. However, it recovered within a few months and has been on the rise since. Even during the more severe periods of the pandemic this year, it only paused briefly before continuing its upward trajectory. Therefore, in general, the Indian market is quite good, making it suitable to invest money and wait patiently.

Except for declines in 2010 and 2016, all other years have seen increases. This year, the Bombay Stock Exchange SENSEX 30 index has already risen by 20.5%; it increased by 15.75% in 2020; 14.4% in 2019; and even in 2018, the year when our CSI 300 index fell by 25%, it still managed to rise by 5.9%; in 2017, it also rose by 27.9%. Over these years, the average increase has been over 15%, which is very stable.

02

Currently, there are two A-share funds that can invest in the Indian market. One is the Teda Hongli India QDII fund, which is an actively managed fund. Its performance in 2019 only increased by about 5%, and in 2020, it was only 2.43%. Compared to the data above, this fund has performed relatively better this year. Its performance in other years has been underwhelming.

Because it is an actively managed fund, it requires a deep familiarity with Indian listed companies to perform well. I have also mentioned that in the A-share market, we should not buy index funds because our index performance is relatively poor. However, for overseas markets, most of the time we should buy index funds, so this fund does not meet our requirements.Another fund is the ICBC India Fund Renminbi, which is somewhat similar to an index fund, but not actually one. It is a Fund of Funds (FOF), in other words, it is a mother fund of index funds, investing in ETF funds that track various Indian indices. Unlike other index funds, this fund only invests 80% in ETFs, which is a relatively low position. The CITIC Securities India ETP Index it tracks is primarily composed of ETF funds that trade on developed markets such as the United States, Germany, the United Kingdom, France, and Switzerland, tracking the Indian market. That is to say, this fund buys some Indian ETFs that are traded in other markets.

It is also important to note that as an FOF fund, it charges twice. In addition to the 1.6% fund management fee and the 0.2% custody fee, there is also the 0.6% of the ETF itself, which adds up to 2.4%, making the overall cost relatively high.

Comparing with the Sensex 30 fund in Mumbai for the past two years, the performance of this fund has not been good. The Mumbai Sensex 30 Index was 27.9% in 2017, 5.9% in 2018, 14.4% in 2019, 15.75% in 2020, and 20.5% this year.

As for ICBC's FOF fund, it rose by 4.46% in 2019, 5.15% in 2020, and 17.21% this year, only this year's performance is relatively close to the Mumbai Sensex 30 Index.

After looking at these data, one might think that the Indian market seems worth investing in, but the two Indian-linked funds we found in the A-share market do not seem very ideal. Therefore, we need to think carefully about how to find suitable funds in the A-share market. For the time being, do not consider markets such as Vietnam, India, including the Hong Kong Hang Seng Index, which has been relatively poor recently. Instead, let's look back at the structural opportunities in the A-share market to see if they are suitable for everyone.