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The Hang Seng TRI has been on a tear, delivering nearly 60 per cent returns over the past year. The Hang Seng Tech Index has done even better, surging close to 75 per cent.
In comparison, the Sensex has returned just 3 per cent in the last year. One would have to be living under a rock to know that it's not an Indian problem, either. A majority of global equity markets have been struggling of late, too.
As a result, mutual funds tracking the Hang Seng are among the top performers globally, catching the attention of investors. But does it make sense to invest now? And if so, how? Before diving into that, let's take a look at why the Hang Seng is rallying.
What's driving the Hang Seng rally?
China's stock market, which had been in a prolonged slump, has staged a strong comeback. Several factors have contributed to this turnaround:
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A sharp rebound in Chinese technology stocks, which were previously hit by regulatory crackdowns.
-
Government stimulus measures, including interest rate cuts aimed at stabilising the economy.
- Improved liquidity, as foreign investors who had withdrawn billions from China are now returning.
While these factors have fuelled a strong rally, history suggests that short-term surges don't always translate into sustainable long-term gains.
Has the Hang Seng been a long-term wealth creator?
While recent returns look impressive, the long-term performance - seven years, 10 years and beyond - does not paint a great picture. It looks anaemic compared to India's Sensex returns.
Long-term returns comparison
| Time period | BSE Sensex TRI | Hang Seng TRI |
|---|---|---|
| YTD | -4.95% | 22.81% |
| 1Y | 3.32% | 58.74% |
| 3Y | 10.01% | 13.18% |
| 5Y | 20.83% | 7.46% |
| 7Y | 13.51% | 3.92% |
| 10Y | 11.33% | 6.98% |
| 15Y | 11.60% | 8.89% |
| 20Y | 14.33% | 8.90% |
| Data as of March 17, 2025 | ||
That said, despite the feeble long-term returns, if you, an Indian investor, seek to put some money in the soaring China market, the easiest route is through mutual funds and ETFs that track Chinese equities. These options bypass the complexities of Liberalised Remittance Scheme (LRS) limits, foreign taxation and currency conversion hassles.
However, a crucial aspect to note is that most international funds are currently not accepting fresh investments due to RBI-imposed restrictions on overseas investment limits.
China-focused funds
| Scheme | Accepting money | YTD returns (%) | 1-year returns (%) |
|---|---|---|---|
| Edelweiss Greater China Equity Off-shore | Yes | 12.06 | 28.46 |
| Axis Greater China Equity FoF | Yes | 12.26 | 23.30 |
| Mirae Asset Hang Seng TECH ETF FoF | No | 38.78 | 100.90 |
| Mirae Asset Hang Seng TECH ETF | Trading on the stock exchange at a premium of 17.9% | 37.96 | 78.90 |
| Nippon India ETF Hang Seng BeES | Trading on the stock exchange at a premium of 12.6% | 25.15 | 60.42 |
| Data as of March 17, 2025 | |||
Currently, Hang Seng ETFs are trading at a premium over their actual NAV (net asset value). As of March 17, 2025, Nippon India ETF Hang Seng BeES is trading at a 12.6 per cent premium and the Mirae Asset Hang Seng Tech ETF is trading at a 17.9 per cent premium. So, if you plan to buy them, note that you will be buying at a higher price.
And why are the ETFs (exchange-traded funds) expensive? Because they are in red-hot demand now. Additionally, with many international funds still closed to new investments, investors looking for foreign exposure are flocking to the few options available, further pushing up ETF prices.
Should you invest in Hang Seng?
Diversifying geographically is a smart move, but it's risky to concentrate too much on a specific country like China.
Instead, we believe ploughing money in the US is a better idea. Many US-based funds, for example, invest in companies with a global consumer base, such as Apple , Google and Microsoft , which earn revenue worldwide.
For those who still want China exposure, don't allocate more than 10 per cent of your international portfolio.
Want to know which international funds with global exposure are worth buying and accepting investors' money? Subscribe to Value Research Fund Advisor.
Also read: Is it the right time to invest in China?
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