Nippon Mutual Fund’s Nippon India Taiwan new fund offer (NFO), which will remain open till 6 December 2021, is among the many international funds that have flooded the market recently.
As per data from Value Research, out of the total 62 international funds available in the market, one-third of them were launched in 2021 alone. As many as 21 international schemes has been launched by various fund houses so far. This is the highest number of launched in the international funds category in the history of mutual funds.
Highlights Of The Scheme
Nippon India Taiwan Fund is a Taiwan-focused thematic fund. The fund will focus on new technology trends, specifically the semiconductor industry. Cathay SITE will be an investment consultant for the fund.
According to the product note, the fund will follow a multi-cap investment strategy. The fund will invest in companies having a dominant market share, successful business model, sizeable market and sustainable high margin from superior technology.
The fund will follow a focused strategy and invest only in high conviction stocks and not hold less than 40 stocks in the portfolio. Also, it will limit the maximum exposure to any single scrip to 10 per cent.
What Works For It?
Rising Demand For Semiconductors: Semiconductors are the brains of modern electronics. They are used in medical devices, communications, computing, defence, transportation, and technologies of the future such as artificial intelligence, quantum computing, and advanced wireless networks. Taiwan is the world’s largest semiconductor contract manufacturer in the world with 52 per cent market share, followed by China with 17 per cent.
Higher Dividend Yield: The dividend yield of companies listed in Taiwan is 2.8 per cent, as of September 2021. The benchmark index for the scheme is Taiwan Capitalization Weighted Stock Index (TAIEX). The dividend yield of TAIEX is 2.76 per cent as compared to Sensex, which has a dividend yield of 0.97 per cent. High dividend yields make Taiwan stocks attractive to global investors in a low interest rate environment.
The fund is investing in just one country so its future will depend on the performance of a single country. Investing in just one foreign country is similar to investing in a sectoral fund that invests in just one sector rather than diversified equity funds that invest across sectors. There are several micro- and macro-economic and geopolitical factors that affect a country’s economic performance.
What Should You Do?
If you have adequately investments in India across market caps and sectors and want global diversification, you may allocate some part to an international fund. However, you may be better off with an international fund that takes exposure across geographies and is not focused on just one country. Invest only if you are really confident about the growth of the Taiwan market.