THE recent gyrations in mainland Chinese stocks have led to investors looking further afield for exposure to emerging markets. 'A few years ago, there was a huge euphoria about investing in China,' said Bill Tatham, divisional director, of Towry Law International. 'Markets shot up and a lot of people jumped on the bandwagon. But a lot of people have realised shares were overvalued and we are seeing problems with accounting and reporting standards and a lot of investors have shied away. 'China funds are down along with markets and I think a lot of people have realised you have a huge economy in China but you can't necessarily translate that into a vehicle for making money just yet.' This has drawn investors' attention away from China towards economies with better opportunities for good returns, such as India. 'India is one of the world's biggest emerging markets with a huge stock market. There are more than 7,000 listed companies and 20 million shareholders. It is a better type of emerging market,' Mr Tatham said. 'The China and Vietnam stories will happen, but it is a bit too early.' Mr Tatham said many investors asked specifically for emerging market exposure. 'Many ask for it because the topic has been getting a lot of coverage so they are aware of the returns that have been made and they have funds available and perhaps a lot of courage,' he said. 'There are still many clients that are too conservative to justify using emerging market funds but, if we think they are the right type of client - that is, looking for growth, not someone about to retire - we will put them in.' For investors who have portfolios heavily exposed to mature markets, emerging market investments can actually reduce the overall portfolio risk by broadening the range of investments. 'We recommend at least 10 per cent of a portfolio be invested in emerging markets, either directly through single country or regional funds or through a global emerging market fund,' Mr Tatham said. Closed-end funds, typically listed in New York or London, were generally not suited to smaller, less sophisticated investors except where recommended by a reputable broker or adviser. 'For the majority of individuals, it is better to buy a more straightforward, authorised, open-ended fund,' Mr Taham said. 'These are far more visible. They are registered and regulated and it is far easier to know what you are getting.' Towry Law particularly likes the Baring Global Emerging Markets Fund, which has a low China exposure but has made good returns over the past few years. 'You could call it a blue-chip emerging markets' fund,' Mr Taham said. 'It gives you good all round emerging market exposure.' Mr Tatham said it was important that investors adopted a 'buy-and-hold' strategy when investing in emerging markets, because of the risk and volatility involved. 'You can't go in looking for quick returns and you should not be surprised even if your investment goes down initially,' he said. 'It is important the investor knows what he is getting and looks at returns over a three to five-year period.' Towry Law deals mainly with 'medium-net-worth' clients whose available investment funds are below the level of private bank clients. Whereas private bankers tend to accept only clients worth more than US$1 million (HK$7.7 million), Mr Law will offer advice to investors with as little as $10,000 to $20,000.