Taiwan is among the world leaders in science and technology with logistical and systemic advantages. No wonder it has second-highest weight in the MSCI Emerging Markets Index and ranked 8th in IMD World Digital Competitiveness Ranking, 2021.

Taiwan’s economy and markets are largely based on Semiconductors and Electronics industries, which in turn have a very wide and diversified use. Taiwan’s surging economic growth is boosted by strong global demand, accelerated pace of advanced technology and digitalization. In order to benefit from Taiwan’s growth story, Indian investors may consider investing in mutual fund schemes focused on Taiwanese market.

Nippon India Mutual Fund has launched India’s first open-ended equity scheme following a Taiwan-focused theme, i.e. Nippon India Taiwan Equity Fund. NIMF and Cathay SITE has signed a Letter of Intent (LOI) for an exclusive strategic collaboration for jointly/severally developing, managing, advising, marketing, and distributing each other’s investment products in India and Taiwan.

On the launch of this fund, Mr Sundeep Sikka, ED and CEO at NIMF said, “The launch of Nippon India Taiwan Equity Fund with Cathay SITE is in line with our objective to become a global asset manager based out of India to provide international diversification to Indian investors leveraging Nippon Life Insurance’s global network. The launch of this fund is a stepping-stone to launch multiple products through this collaboration of the Nippon Life Insurance Global network. Taiwan is the 2nd largest country by weight in the MSCI EM index after China. We think it is an interesting opportunity for Indian investors.”

In addition, Andy Chang, President and CEO of Cathay SITE, said, “We are excited about the launch of the first Taiwanese equity Fund in India. Cathay SITE has long been cultivating Taiwan market. It’s our honour to extend our experience in Taiwan equity investment to NIMF and to offer Indian investors the opportunities to ride a wave of the technology megatrend. I am sure this is one of the many new products collaborations we will be doing to get Indian money into Taiwan and launching Indian products in Taiwan.”

Table 1: Details of Nippon India Taiwan Equity Fund

Type An open ended equity scheme following Taiwan focused theme. Category Thematic Fund
Investment Objective The primary investment objective of Nippon India Taiwan Equity Fund is to provide long-term capital appreciation to investors by primarily investing in equity and equity related securities of companies listed on the recognized stock exchanges of Taiwan and the secondary objective is to generate consistent returns by investing in debt and money market securities of India. However, there can be no assurance or guarantee that the investment objective of the scheme will be achieved.
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter. Additional Purchase Rs 1000 and in multiples of Re 1 thereafter. Face Value Rs 10 per unit
Plans
  • Regular
  • Direct
Options
  • Growth
  • Income Distribution cum capital withdrawal (IDCW)
Entry Load Nil Exit Load
  • 1% if redeemed or switched out on or before completion of 3 month from the date of allotment of units.
  • Nil, thereafter
Fund Manager Ms Kinjal Desai Benchmark Index Taiwan Capitalization Weighted Stock Index (TAIEX)
Issue Opens: November 22, 2021 Issue Closes: December 06, 2021

(Source: Scheme Information Document)  

The investment strategy for Nippon India Taiwan Equity Fund will be as follows:

Nippon India Taiwan Equity Fund will aim to predominantly invest in equity and equity related securities of companies listed on the recognized stock exchanges of Taiwan.

The investment strategy of the fund would be to create a diversified portfolio of companies participating in Taiwan’s growth-oriented sectors and listed on the country’s recognized stock exchange. The Nippon India Taiwan Equity Fund will invest in companies across market capitalization.

The investment philosophy would be a blend of the top-down and bottom-up approaches without any extreme sector bias. The sectors would be mainly assessed on their growth potential in the mid and long term. On the other hand, companies within the selected sectors would be analysed taking into account business fundamentals such as, nature and stability of business, potential for future growth and scalability, sales volume, earning performance, corporate image, company’s financial strength and track record, etc.

Investment views/decisions will be taken based on 3 Ms:

1) Dominant Market Share from successful business model,

2) Sizable Market from Mass Demand,

3) Sustainable High Margin from superior technology or high entry barrier

The fund will endeavour to follow a disciplined investment approach and the portfolio will be reviewed & rebalanced at regular intervals, whenever deemed necessary.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation of Nippon India Taiwan Equity Fund

Instruments Indicative Allocation (% of total assets) Risk Profile
Minimum Maximum
Equity and Equity related Instruments listed on the recognized stock exchanges of Taiwan* 80 100 Medium to High
Debt & Money Market Instruments 0 20 Low to Medium

*The fund will also invest in initial and follow on public offerings to be listed at recognized stock exchanges of Taiwan.
(Source: Scheme Information Document)  

Who will invest in Nippon India Taiwan Equity Fund?

Ms Kinjal Desai will be the dedicated fund manager for this scheme.

Ms Kinjal Desai is Fund Manager – Overseas Investment at Nippon Asset Management India. She has an overall 7 years of experience and her qualification is MSc (Economics). Prior to this, she worked as Associate Equity Investments at NAM India Assisting Lead Analyst in Equity Research, idea generation and sector Monitoring, assisting Fund Managers in stock selection and monitoring of overseas investments.

The other schemes Ms Desai manages are Nippon India Japan Equity Fund, Nippon India US Equity Opportunities Fund, Nippon India ETF Hang Seng BeES, and Nippon India Multi Asset Fund.

Fund Outlook – Nippon India Taiwan Equity Fund

Nippon India Taiwan Equity Fund will invest in securities of the companies listed on the recognized stock exchange of Taiwan.

The scheme will follow a multi-cap strategy with a portfolio comprising of growth and value stocks. The focus will be on new trends in technology and will hold less than 10% investment in a single stock.

The scheme will be actively managed and aim to identify industry leaders from a long-term horizon and tend to hold less than 40 holdings with a high conviction. The scheme allows investors to participate and have a global exposure by investing in securities listed on the recognized stock exchanges of Taiwan.

Cathay SITE, which is one of the largest Asset Managers in Taiwan & Part of Cathay Financial Holding, is the investment consultant for the fund. Taiwan plays a critical role in the entire supply chain globally, therefore, investors may benefit from diversification due to low correlation between Indian and Taiwanese markets.

However, do note that along with global exposure and investment in emerging opportunities in the Taiwanese market, the scheme is still prone to certain risk. The scheme will invest in international equities which are highly risky, and there may be a concentration risk due to any down trend in the growth story of Taiwan. In addition being a thematic fund following Taiwan’s focused theme, there are geopolitical risks and currency fluctuation risks.

The scheme is suitable for investors with a high-risk appetite seeking to gain from the growth of companies listed on the recognised stock exchange of Taiwan. You must ensure a long investment horizon to sustain the market volatility and that your investment objective aligns with the fund.

This article first appeared on PersonalFN here


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