Mirae Asset India–China Consumption Fund (MICF) is an equity diversified mutual fund scheme that aims to invest at least 65% of its corpus in Indian equities and the rest in Chinese equities. MICF will invest in consumer-oriented sectors, such as fast-moving consumer goods, banking, media and telecom. While fund manager Gopal Agrawal will manage the India portion of this scheme, Basavraj Shetty is the designated fund manager of the international portion of the portfolio, with assistance from Mirae’s Hong Kong office.
A growing middle-class population and their rising income are two factors that will give a boost to the middle-class consumption and companies engaged in this sector. Mirae estimates that India’s middle-class spending will rise by 18% and China’s will increase by 15% over the next five years. Rising population of India and China is expected to boost demand for products manufactured by companies in the consumption space. For instance, the fund house expects Asia’s middle class population (excluding Japan) to grow at a compounded rate of 11% over the next five years. As per the five year plan released by the Chinese government, the minimum wage is expected to increase by 50% during the period from 2010 levels.
China’s growth projections can paint an attractive picture, but with a country that is devoid of democracy and is tightly controlled by its government, it’s a bit tricky to navigate their projections. Further, though investing in foreign equity shares offers diversification, there isn’t much merit in looking overseas when the Indian equity market offers multiple options with scores of listed companies and equity mutual fund schemes that come with a decent track record. Mirae’s existing scheme that invests in China (Mirae Asset-China Advantage Fund) returned 10.42% in the past year. In other words, it navigated the recent volatility in Chinese equities reasonably well. However, in 2010, the fund underperformed equity diversified schemes that focused solely on India.
Mint Money take
Consumption is an attractive theme that most fund managers in India seem to have lapped on. However, ignoring India-specific funds—some of them with a good track record—and going abroad is completely your choice. If you must invest, an ideal time horizon would be not more than three years. Also, take minimal exposure if you must. A better alternative is to stick to a India-specific diversified fund.