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Nippon Life India Asset Management on Monday launched Nippon India Taiwan Equity Fund, which is India's first open-ended equity scheme following Taiwan-focused theme. The new fund offer (NFO) will remain open for subscription till 6 December.
The benchmark index of the Nippon India Taiwan Equity Fund is Taiwan Capitalization Weighted Stock Index (TAIEX) and will be managed by Kinjal Desai.
This fund will be advised by Cathay SITE, the largest asset manager in Taiwan with $42.8 billion in asset under management.
The scheme will follow a multi-cap investment strategy with portfolio comprising of growth and value stocks. The fund focus will be on new technology trends and will hold less than 10% investment in a single stock.
As per the scheme’s product note, Taiwan has a nominal GDP of $669 billion as of 2020, and the country has the second-largest weight in MSCI Emerging Market Index after China. Further, Taiwan’s economy and markets are largely based on semiconductors and electronics industries, which in turn have a very wide and diversified use.
The East Asian nation is a dominant player in the global semiconductor market and is a key beneficiary of booming global demand.
According to Nippon India, one should invest in its Taiwan equity fund, as it provides a global play on the semiconductor and electronics industry, and investors can benefit from diversification due to weak correlation between Indian and Taiwanese market.
However, experts warn against country-specific approach for investment diversification.
Amol Joshi, founder, Plan Rupee Investment Services, said, “You can’t have 30-50, or innumerous schemes. A typical investor’s well-run portfolio should have four-eight or six-eight schemes. Within that, you will hardly have space for one international offering, and if that is the case, then that one international offering, at least, I would recommend would be a US-based, broad market diversified fund such as the S&P 500."
Further, experts suggest that a fund based on Greater China (China, Hong Kong and Taiwan) would be a better bet and safer than a Taiwan-focused scheme.
As per Rushabh Desai, founder of Rupee with Rushabh Investment Services, valuations are reasonable in the Greater China region.
“If you see the P/E Ratio of the TAI EX Index, it’s trading below its 10-year historical average. So its 10-year historical average is around 15, and is trading at around 13. From valuations perspective, it is very attractive, and also corporate profits have shown tremendous upside growth. I see immense long-term potential in the Taiwan market, but I would still bet on the Greater China region, it just gives a better diversification rather than just a concentration risk," he added.
Additionally, investors should keep in mind that any de-globalization or geopolitical developments can affect the Taiwan markets.
“If many companies decide to re-shore their manufacturing, which we can see going ahead, because everyone was concentrated mainly towards China for their manufacturing, and this pandemic brought a huge halt to the supply chain. Global players are definitely going to look at this in terms of diversification. So, these are the few risks that emerging markets will face – globalization and re shoring of manufacturing units. So, in a way, Taiwan, Hong Kong and China will somewhere be little bit interconnected," Desai added.
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