The Stocks and Shares ISA is a fantastic vehicle for building wealth. In this account, I can buy shares, funds, and bonds, and any returns I make are totally tax-free.
However, not all shares around the world are eligible. And most ISA platforms don’t give retail investors easy access to some that are.
Take Chinese toy firm Pop Mart International, for example. It makes Labubu dolls, which went viral earlier this year. I know this because my daughter begged me to buy her these furry, ugly-cute creatures.
In H1, Pop Mart’s profits skyrocketed nearly 400%, and the stock is up 1,200% since January 2024. Pop Mart is now worth more than Hasbro and Barbie maker Mattel combined!
However, Hong Kong-listed Pop Mart is not readily available through my ISA provider.
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Investment trust
Still, there are ways for me to invest in Asian equities in my ISA. One simple way is through London-listed investment trusts. In my eyes, these are the best option because they offer diversification and the expertise of fund managers.
In relation to China, I have never been to the country and cannot speak the language. This makes it difficult for me to watch investor presentations and assess whether I trust management to create value for me as a shareholder.
Most investment trusts, on the other hand, have researchers on the ground, often speaking directly to management teams.
Of course, this doesn’t guarantee success. But, it obviously gives them a far better insight than I have into the competitive and regulatory dynamics in such markets.
A trust to consider
For investors wanting to get some exposure to the China, the world’s second-largest economy, I think Baillie Gifford China Growth Trust (LSE:BGCG) is worth a look.
One of the managers, Linda Lin, is a native Mandarin speaker. And the trust regularly meets with companies in Shanghai, Beijing, and Shenzhen.
It has benefited from Pop Mart’s explosive rise because it has a stake in it. However, Labubu dolls might be a short-term fad, so it’s reassuring that the toy maker only makes up 3% of the portfolio, with the rest filled with the crème de la crème of Chinese tech.
For example, ByteDance is the owner of TikTok. And while TikTok’s US assets have been sold, most of ByteDance’s revenue and profits actually come from China. And it continues to grow strongly worldwide.
Meanwhile, Kweichow Moutai is the world’s largest spirits company, far exceeding Diageo by market value. Another holding, CATL, is the world’s largest EV battery maker, with around 38% global market share.
Invented in China
I think it’s too risky to buy individual Chinese stocks myself, for the research reasons already highlighted. Regulatory changes can also come out of left field, which adds risk for this trust.
But BYD has grown dominant in electric vehicles, as has TikTok in social media. I expect more ground-breaking global firms to emerge from China in fields like semiconductors, AI, medicine, and robotics.
This should give the trust ample growth opportunities in the years ahead.
According to joint manager Sophie Earnshaw, we’re moving from an era of ‘made in China’ to ‘invented in China’. This trust, which is trading at an 8.4% discount to net asset value, offers a good way to consider getting on board. I’m taking it seriously myself.
