China’s efforts to stabilise its struggling stock market make it a good time to review investment trusts that invest in the country and the Asia-Pacific region more broadly.

The problems of the world’s second-biggest economy, racked by a property crash and weak consumer confidence following strict Covid lockdowns, have weighed on the shares of London-listed China and Asia funds.

Beijing’s announcement that it would ‘guide’ Chinese institutions to buy more shares in its equities market, which in sterling terms has halved in the past three years, saw the Shanghai Stock Exchange index jump 6% earlier this week.

Shares in London’s four China trusts followed suit, raising the question of whether this could finally be a turning point for funds that have crashed by between 44% and 71% in the past three years.

These declines have left the trusts’ shares trailing 7-9% below asset value. Although these discounts are not huge, readers should remember that the Chinese shares the trusts own are also depressed. Chinese companies trade at less than 10 times forecast earnings, which is cheaper than their long-term average of 12 and well below the peak of nearly 18 in 2021 after Covid-19 struck.

Investors willing to risk further losses in a long-term bet on China’s economic and technological development should ignore the noise around the recent liquidation of Chinese property developer Evergrande and head for Fidelity China Special Situations (FCSS ).

With net assets of £932m, Fidelity China is already the biggest stock in its peer group and the easiest to buy and sell, attributes set to improve further with its imminent merger with £177m Abrdn China.

Managed by Dale Nicholls, Fidelity China is the best performer in its subsector even though the shares have delivered just 0.1% including dividends over five years.

However, in the 10 years Nicholls has run the portfolio, shareholders have received a more impressive 114% total return, beating the 46.4% from the MSCI China index. The shares stand on a 6.7% discount.

If you’re looking for a bigger bargain, haven’t the stomach for a volatile China trust, or just aren’t convinced about a Chinese revival, cast your eyes to Asia-Pacific, where there are several attractively priced investment trusts investing more broadly in the world’s fastest-growing region.

James Thom, co-manager of one of them, Asia Dragon (DGN ), told investors at the Winterflood Investment Trust conference last month that all was not doom and gloom. While China and Hong Kong shares slumped 19% last year, markets in the rest of Asia advanced 13%.

He said double-digit corporate profits growth was forecast in most Asian countries in the next two years, including China, where the trust has around a third of its assets. Growing demand for semiconductors and technology from the revolution in AI is set to boost profits in Korea and Taiwan by 57% and 17% respectively.

India, where 17% of the fund is invested, is growing at 6.25% a year – faster than China’s annual rate of 4.85% – as its burgeoning middle class drives expansion in financial services and real estate. Company earnings are forecast to grow 16% this year, but Thom said the market looked dear.

Unfortunately, Questor’s view is that Asia Dragon, the biggest of trusts investing in large Asia companies, is not the one to back yet. A merger last year with stablemate Abrdn New Dawn puffed the Dragon’s assets to £680m and put it on the radar of more investors. Its shares look cheap at 16% below asset value, but that reflects poor performance, with a return of just 2.7% over five years as its ‘quality growth’ stocks struggled in a market led first by tech stocks and then by ‘value’ stocks rebounding as economies reopened.

When better-performing competitors are available on average discounts of 11%, Asia Dragon doesn’t look cheap enough. Rivals Invesco Asia (IAT ), JPMorgan Asia Growth & Income (JAGI ), Pacific Assets (PAC ), Schroder Asian Total Return (ATR ) and Schroder AsiaPacific (SDP ) all have their claims, but the one we’d back is the Baillie Gifford-managed Pacific Horizon (PHI ), the top performer over five and 10 years with returns of 85.7% and 248% respectively.

Like the others, the trust has suffered in the three-year downturn but is set to benefit from its lead manager, Roddy Snell, being replaced as co-manager of Baillie Gifford China Growth (BGCG ). That is good news for Pacific Horizon, where Snell, a pragmatic growth investor, can now focus his energies. On a wider-than-average 12% discount, it’s the pick of the bunch.

Questor says buy Fidelity China Special Situations, Pacific Horizon.