Chinese stocks: Indian investors look beyond Magnificent 7, say Ni Hao to Chinese stocks

Mumbai: Investors in India are changing tack in their approach to direct overseas stock investments. Gone are the days when their global bets were anchored to US technology giants from the Magnificent 7, such as Nvidia, Apple and Tesla. Nowadays, they are dipping their toes into Chinese waters, with BYD, Tencent and Alibaba finding their way into their global portfolios.

The bigger interest in Chinese technology giants these days is on account of cheaper valuations compared with their American peers and a general dip in appetite towards US equities in the wake of uncertainties around the trade tariff regime.

Investors can bet on foreign stocks and markets through two routes: international schemes of domestic mutual funds and the direct route via local online trading platforms such as INDmoney, Vested Finance, Borderless and Interactive Brokers, among others. For direct investing, they use the Liberalised Remittance Scheme (LRS) route that allows Indians to transfer up to $250,000 per financial year overseas.

Though mutual funds remain the more preferred option for overseas investing, the direct channel has grown in popularity in recent years.

Remittances for direct stock investments in foreign equities and debt, which were at around $450 million until 2020-21, have gone up to about $1.6 billion, said Nikhil Behl, CEO-Stocks, at investing platform INDmoney.

“This clearly shows that the market, which was earlier available and accessed by a select few, is now accessed by more investors to diversify their investments,” he said. CHINA MOVE
Traditionally, most of the trading volumes have been in the ‘Magnificent 7’ comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla. But, in the past few weeks, some of the trading interest has shifted to Chinese Exchange Traded Funds (ETFs) and companies mainly in new-age technologies such as Electric Vehicles, Artificial Intelligence and semiconductors. “Since March, there has been some slow down, and shift towards investments in China, Hong Kong(like China Large Cap and Hang Seng ETF), and more interest in Chinese companies such as BYD, Alibaba and Tencent,” said Viram Shah, founder and CEO, Vested Finance. He said Alibaba has seen a four times surge in trading volumes on the Vested Finance platform of late.

Activity in Baidu and iShares China Large-Cap ETF went up 2.8 times. The highest appetite is for Chinese stocks, securities and ETFs listed on US bourses Domestic investors’ growing appetite for China comes in the wake of growing uncertainty in the US. “Fundamentally, the US became less attractive as S&P 500’s forward earnings expectations were trimmed while the government started focusing on fiscal consolidation, and the US Dollar rally appears far stretched,” said Jitendra Gohil, Chief Investment Strategist at Kotak Alternate Asset Managers.

“This is why people have started liking cheaply valued markets like China, and Germany in Europe, as they demonstrated plans of fiscal expansion, which is always liked by the markets.”

US STILL NUMERO UNO
That does not mean the US stocks are out of the picture. Despite a dip in popularity, American technology giants remain their top picks. Sitashwa Srivastava, founder & CEO, Borderless (formerly Stockal) said Tesla and Nvidia are two among the top three shares traded on their platform. These are also among the top traded stocks on Vested Finance. Behl said adoption of the systematic investment plan in US stocks has jumped by 30% over the past six months. “While there’s a clear diversification trend beyond the ‘Magnificent 7’. these names still dominate first-time purchasers (> 50% of users start with them),” he said