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.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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.

The post Can I buy the Labubu doll maker in my Stocks and Shares ISA? appeared first on The Motley Fool UK.

Moreover, after enduring a difficult few years, shares of the investment trust are up 60% in the past 12 months. So, what’s going on? Let’s take a look.

Tricky period

Baillie Gifford took over the Witan Pacific Investment Trust in 2020 and gave it a Chinese growth makeover. However, after reaching a peak in early 2021, the share price fell off a cliff. In fact, it’s still down 55% since February 2021.

Three reasons explain this. First, there was a dramatic post-Covid slowdown in China, with its economy not bouncing back as strongly as expected. Weak consumer spending and property sector woes also weighed on growth.

Also, rising interest rates made growth stocks less attractive worldwide, hitting Baillie Gifford’s China bets especially hard.

Finally, there was a tech crackdown from Beijing’s regulatory bodies. These targeted internet giants like Alibaba and Tencent, spooking investors and slashing valuations. 

Discounted tech stocks

These discounts still persist. E-commerce giant Alibaba, for example, is sporting a forward price-to-earnings (P/E) ratio of just 13.7. 

For context, that’s less than Tesco, despite Alibaba operating in high-growth markets like international e-commerce, cloud computing, and AI.

Another cheap stock in the portfolio is PDD Holdings, the parent company of Pinduoduo and Temu. It’s trading on a forward P/E multiple of 12.5. 

The investment trust also has private holdings, the largest of which is TikTok owner ByteDance, at around 10% of assets. Last year, ByteDance generated revenue of $155bn, up 38% year on year, and it’s aiming for roughly $186bn this year. 

That would put it near rival Meta’s revenue. Yet ByteDance’s $335bn valuation is a fraction of Meta’s meaty $1.85trn market cap. So we can see how cheap these tech holdings are.  

That said, it also owns Pop Mart International. Shares of the Labubu doll maker have surged 610% in a year, so they’re not cheap anymore.

Given the rate at which my daughter asks me to buy her more Labubu dolls, Pop Mart stock is destined to keep rising! 

The top 10 holdings make up 50% of assets, meaning the portfolio is concentrated. High conviction is a plus for me, though it adds risk if top holdings don’t perform.

Mixed performance

While the one-year performance has been strong, the five-year chart hasn’t been so good. The net asset value (NAV) has fallen around 14% versus a 5% decline for its benchmark.

As such, the trust will offer shareholders a full buyback at NAV in 2028 if it fails to beat its benchmark between late 2024 and 2028.

This doesn’t protect against poor performance, but it does de-risk the investment case somewhat.

Worth a look

When US-listed Russian stocks essentially became worthless following Moscow’s invasion of Ukraine in 2022, I envisioned something similar happening with US-listed Chinese stocks if Beijing ever invaded Taiwan. I think this is an outside risk.

Therefore, I’m satisfied getting limited Chinese exposure through Scottish Mortgage Investment Trust.

However, for readers wanting to invest cheaply in leading Chinese tech firms, this trust may be worth a look. It’s currently trading at a 9.5% discount to NAV.

The post Up 60%, but this investment trust is still packed with value stocks! appeared first on The Motley Fool UK.