Nippon Life India Mutual Fund (MF) has launched a Taiwan-focused fund. The Nippon India Taiwan Equity Fund aims to capture the growth potential of the semiconductor industry of Taiwan. The country is globally the biggest chip manufacturer. The scheme looks to ride on Taiwan’s economic growth.
Cathay SITE, the largest asset manager in Taiwan, will advise the fund house.
Mirae MF has launched a China-specific fund. The Mirae Asset Hang Seng TECH ETF will invest in 30 of China’s largest technology companies. The fund will track the Hang Seng TECH Index, which is listed on the Hong Kong stock exchange.
As ETFs require demat accounts, Mirae MF has also launched a fund of fund for investors.
Both the funds have an underlying technology theme. Nippon’s Taiwan fund will invest in Taiwanese semiconductor chips and electronics companies. China has also started focusing on the semiconductor industry.
Chips are critical for autos, smartphones, televisions, communication equipment, etc. Even for emerging technologies such as artificial intelligence, Internet of Things (IoT) and electric vehicles, chips are critical.
Mirae’s Hang Seng TECH ETF will invest in China’s 30 largest technology companies across hard-tech (semiconductor, smartphone manufacturers, consumer electronics, data centres, etc.) and soft-tech (e-commerce, online gaming, cloud computing, etc.) segments.
The TECH ETF will give exposure to a wider range of sectors compared to Nippon’s Taiwan fund. But given the wide uses of semiconductors and chips, investors will indirectly get exposure to various sectors in the Taiwan fund as well.
Regulatory concerns, geopolitical tensions
Chinese regulators now want to place controls on the tech companies, which earlier had little restrictions.
The government’s aim behind these regulatory changes is to improve data security, consumer rights and reduce anti-competitive practices.
The Chinese soft-tech companies, as mentioned above, have taken the brunt of these regulatory intervention, with their stock prices falling steeply.
The e-commerce company Alibaba, online gaming giant Tencent, the food delivery company Meituan, are among the Chinese tech companies that have faced regulatory actions.
Taiwan’s semiconductor and electronics companies have not faced any major crackdowns, as semiconductors contribute to 30 percent of its exports.
However, the country itself has been caught up in geopolitical tensions with China. To be sure, Taiwan’s stability is important for the global supply of semiconductors and that is why the US government has also regularly expressed its support for Taiwan. Taiwan is a major supplier of semiconductors to the US, as well as China.
What should investors do?
Both funds focus on a country and an investment theme. While these funds have the potential for generating high returns, they also come with high risks. There are country and industry-specific risks. The schemes are suitable for investors with high risk-appetites and are savvy enough to know when to enter and exit such investments. The NFO of Nippon India Taiwan Equity Fund is open till December 6, 2021, while that of Mirae Asset Hang Seng TECH ETF is open till November 29, 2021.