Nontaxable funds recommended

Asset management companies are recommending nontaxable funds investing exclusively in Chinese and Southeast Asian equities as profitable investments.

According to FnGuide, there are currently 277 nontaxable funds investing exclusively in overseas equities that are available in Korea. When asked to recommend the most promising funds, 17 asset management companies proposed 32 funds.

These funds invest more than 60 percent in overseas equities, and the government does not tax the profits. The limit, though, on how much of the investment is nontaxable is set at 30 million won ($27,000).

Among the 32 funds that were recommended by asset management companies, 10 were investing in Chinese equities. According to the Korea Financial Investment Association, the most popular nontaxable funds investing overseas in August were those working in China. In just that month alone, 161.3 billion won in net investments were made in the funds.

“Although there are short-term risks, there are positive signs considering the rapid reforms being pushed by the Chinese government,” said Choi Ji-un, an analyst at Shinhan BNP Paribas Asset Management. “One can expect profitable performance in the middle to longer term when investing mostly on information technology and consumer goods.”

Among the funds investing in China, the one with the best performance is Schroder China Growth, with a six-month yield of 21.7 percent as of Sept. 20. The fund invests mostly in Hong Kong equities rather than in mainland China, and mostly on information technology and financial stocks.

Macquarie, known for its aggressive investment strategy, recommends the China Bull 1.5 Feeder. This fund invests in stocks, futures and exchange-traded funds on the Hang Seng China Enterprise Index. When the market goes up, so do the fund’s profits.

Asset management companies also recommend funds investing in Southeast Asia and India.

Korea Investment Management recommended the Vietnam Growth fund, where investment has increased 106.2 billion won between March and August this year. That’s equivalent to 13.4 percent of new investment made in nontaxable overseas equity funds during the same period.

Mirae Asset Global Investment and Shinhan BNP Paribas recommended funds investing in India. The six-month yield on the Mirae Asset Global Great Consumer fund was 22.9 percent and 17.4 percent for the Shinhan BNP Paribas Bonjour India fund.

For those skeptical about investing in a single country, the asset management companies recommended Samsung and KB Asset Management’s funds that invest in China as well as Southeast Asia. Another recommended fund of a similar variety was Shinyoung Marathon Asia Value.

Among overseas funds focused on investment sectors, Hanwha Global Healthcare Fund was recommended. This fund has been around for over 10 years.

Mirae Asset and Asset Plus also invest mainly in global companies with strong brand power.

IBK recommended the only fund investing in overseas gold.

The window of opportunity available to invest in such nontaxable overseas funds is limited to Dec. 30, 2017. At the end of next year, even if investors want to open an account in nontaxable overseas equity funds, they will not be able to do so.

BY KANG BYOUNG-CHUL, LEE HO-JEONG [lee.hojeong@joongang.co.kr]