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Will Big China and India Stakes Help These Funds?

A recent rally has given some offerings a boost--but it might not last.

David Kathman, 04/14/2009

World stock markets have rallied significantly from their lows over the past month, and some of the biggest beneficiaries have been groups of stocks that were hit hardest in last year's market collapse. Financial stocks are the most prominent; bank stocks have risen sharply since early March, thanks to renewed optimism about the stability of the banking system and Treasury Secretary Timothy Geithner's plan to get toxic assets off bank balance sheets. As we noted recently, mutual funds with a big percentage of their portfolios in bank stocks have done well relative to their peers over the past month, even though their one-year records are still ugly.

Another group that has fared very well in this rally is emerging-markets stocks, especially those from China and India. After several years of huge gains, both markets got pummeled in 2008 as the world economy soured. However, they've bounced back in 2009, with the March rally giving them an extra boost. As of April 8, China's Shanghai Stock Exchange Composite Index was up almost 30% in 2009, including a 13% gain since early March. India's BSE Sensitive 30 Index (Sensex) is up 11% since the beginning of the year and 32% from the low it hit on March 9.

Back in late 2007, when those markets were still going great guns, we looked at U.S. domestic equity funds with the largest percentage of their assets in Chinese and Indian stocks. Not surprisingly, we found that these funds had done quite well relative to their peers, though we warned that this could change when and if the Chinese and Indian markets came back down to earth. When we revisited both lists about six months later, we found that most of the domestic funds with big China and India exposure had trailed their peers in the first half of 2008.

Now that Chinese and Indian stocks are again showing signs of life, we decided to check in again to see which funds have a lot of exposure to these markets, and how they've been doing lately. First, China. The biggest exposure belongs to specifically China-oriented funds, and these have done pretty well, even relative to the Pacific/Asia ex-Japan Stock category. AIM China AACFX, for example, ranked in that category's top 20% for the year to date as of April 8, and Oberweis China Opportunities OBCHX ranked in the top decile.PAGEBREAK

When we look at U.S. domestic-equity funds with the biggest China exposure, it's a similar story, though not as dramatic.

This time, we restricted the list to funds that have at least $100 million in assets, and eliminated clone funds. The following table shows the 10 funds with the largest percentage of their latest portfolio in Chinese stocks. We also show each fund's category, the size of its asset base, its percentile ranking in its category for the year to date as of April 8, and its ranking in its category for the past year.

 Domestic Funds with Big China Stakes
 

Category

Size
($Mil)
China
%
% Rank
Cat YTD
% Rank
Cat 1 Yr
Van Kampen Mid Cap Growth VGRAX
Mid-Cap Growth
1,172.0 10.16 16 77
Van Kampen Equity Growth VEGAX
Large Growth
196.1

10.07

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