e-fundresearch: "Which macroeconomic factors are currently most important for Indian equities? Are these international or domestic factors?"Manish Sha, Co-Fondsmanager (Lead-Fondsmanager Wojciech Stanislawski), "Comgest Growth India" (05.10.2010): "The strength of India is in its domestic economy. Growth is domestic led. Exports including service exports account for less than 20% of the GDP.
Dependency ration is low i.e. proportion of children and old age people to working age adults is low and will remain so for a generation.
Banks NPA’s are low and Corporate balance sheets are not stretched. Otherwise we pay no big attention to macroeconomic factors due to our bottom up approach." Richard Chow, CFA, Head of Asia Ex-Japan Growth Equities, "ACMBernstein – India Growth Portfolio" (06.10.2010): "Availability of foreign capital would be one of the key drivers for the Indian economy. India is a high growth economy with investment demand outpacing domestic savings. This gap between investments & domestic savings needs to be funded through foreign capital. The high need for foreign capital is reflected in the high current account deficit of around 3%. It is funded largely through portfolio inflows currently.
Foreign capital inflows can be broadly broken up into portfolio flows (equities and debt raised by corporates borrowing offshore) and FDI or Foreign Direct Investments.
We believe FDI tends to be more stable than portfolio flows and therefore should be encouraged. Accelerating FDI will need improved governance, structural reforms and infrastructure - all of which have slowed down recently. The Government´s ability to fund infrastructure is restricted due to fiscal deficit already at about 5% levels.
Portfolio inflows are strong and threatening to cross the 2007 peaks, but are a function of the fickle risk appetite of global investors and international liquidity.
The other main driver is the rising inflation. Inflation measured through wholesale prices index peaked at about 11% in April and has eased since to 8.5% in August. But, we don’t believe we are out of the woods yet. Inflation measured through the primary articles index has risen from 15.4% in end August to 18.3% on 18 September. The crux of the problem appears to be that the demand is growing significantly faster than supply. The longer term solution is to increase supply through more investments. But, in the shorter term, the central bank may opt for higher interest rates to cool down demand.
Thus, international liquidity and domestic inflation are the two key macroeconomic factors that are most important for Indian equities."
Sanjiv Duggal, Fondsmanager, "HSBC GIF Indian Equity AD USD" (07.10.2010): "The Indian economy is expected to grow strongly over the next few years on the back of increasing domestic consumption and increasing spendings on Infrastructure. India has been a benifeciry of strong global liquidity in CY10 receiving substantial amounts of portfolio flows which may reverse on global risk appetite fading. On the domestic front inflation for India is a key concern, though we expect it to moderate in coming months."
Nick Scott, Fondsmanager des "BGF India Fund A2 USD" (07.10.2010): "We see a couple of macro factors influencing the Indian equity markets, the key ones are highlighted below:
Strong foreign capital flows seen during this year and also during the previous month have helped boost the equity markets and also helped ease liquidity pressures within the domestic markets. A lot of these flows are being driven by higher allocations to India within the emerging market pie and also by higher allocations to emerging markets by funds looking for higher growth (given the relative growth disparity between emerging markets and OECD countries).
Inflation is another important macro economic factor for India. High inflation which has remained a concern for sometime now has finally started showing signs of abating, thereby providing comfort. It is expected to decline further to 6% pa by the end of the current fiscal, from the current levels of 8.5% pa, though rising oil prices could pose a challenge to the current declining trend in inflation.
Monsoon is another important variable which impacts the Indian economy. The current year’s monsoon has seen a sharp turn around with the annual rainfall now being 2% in excess compared to the 15% deficient rainfall witnessed early in the season. In addition to boosting economic growth, a favourable monsoon should also put more disposable income in the hands of the people as a large part of the rural/semi urban population still depends on agriculture/agriculture related activities for livelihood.
Furthermore, the Demographics are structurally very positive for India given the growth in working age population estimated over the coming years and the subsequent rise in the middle class. This is fueling consumption growth and is creating a huge opportunity for several sectors (Autos, FMCG, Financial services etc.)."
Aberdeen Fondsmanagement Team, "Danske Invest India A" (06.10.2010): "Broadly, there is a risk of economic overheating, with price inflation high, the government spending more than it brings in and companies once again engaging in corporate activity. Investors have taken a benign view, because earnings have been strong. But the Sensex is now at a 32-month high and valuations are on around 20 times, so it is looking expensive. We are relatively comfortable with inflation because the central bank is very proactive and we believe it is now on top of that threat. The structural factors are real enough but they are not near term problems. Despite India´s low relative trade-to-GDP ratio, a renewed global downturn might be the main concern."
Pinakin Patel, Portfolio Manager, "JF India A Dist USD" (06.10.2010): "India is a domestically driven economy, so the drivers are mostly domestic. Less than five percent of GDP comes from exports. Even during the crisis India generated GDP growth of a minimum of six percent and typically would generate a GDP growth of eight percent. These factors have stayed mostly positive."
e-fundresearch: "How do you assess the development of the relationship of India with China ("Chindia") and what is the impact on Indian companies?"
Manish Sha, Co-Fondsmanager (Lead-Fondsmanager Wojciech Stanislawski), "Comgest Growth India" (05.10.2010): "Relation with India can be divided into two levels: political and economic. To keep India in check China raises the border issue. It claims one Indian state of Arunachal Pradesh as being part of Tibet and thus belonging to China. This is to keep India from raising the Tibet issue. At the economic level trade between the two countries has increased."
Richard Chow, CFA, Head of Asia Ex-Japan Growth Equities, "ACMBernstein – India Growth Portfolio" (06.10.2010): "The India China relationship has been evolving on various fronts. As everywhere else, the progress on the geo-political aspects are slow and can be expected to continue to be that way. But as trading partners, the relationship is booming. Trade between India and China has been growing at a compound annual growth rate (CAGR) of 35%. China is emerging as one of the larger sources of imports for India. Quite unlike the developed market, large part of China´s exports to India are skewed towards capital goods particularly for the power and telecoms sectors. India´s exports to China are primarily iron and cotton."
Sanjiv Duggal, Fondsmanager, "HSBC GIF Indian Equity AD USD" (07.10.2010): "The India-China linkages have been relatively small in the past, which is surprising for two such large, growing economies. This is changing with rising trade over the last few years, and the private sector is making the connections between the two giants, implementing Chindia strategies. The day of the Chindia global players is not far away. Indian companies are starting to set up offices in China, not only to access Chinese labour and to use as a manufacturing base, but also as an end market. In India, entry barriers have been lowered, and Chinese capital goods companies have made inroads in the Telecom and Power sectors, for example."
Nick Scott, Fondsmanager des "BGF India Fund A2 USD" (07.10.2010): "India´s growth pattern in some industries - notably consumer durables, property and infrastructure could start mirroring Chinas growth pattern of the last decade. There is a little bit of competition for capital at this stage between India and China, but India is a domestic consumption led economy whereas China is heavily dependent on global trade.
From a return structure, we believe China´s ROE´s might increase over the coming years while that in India might trend a little lower, although growth in India is expected to catch up with China which is expected to grow at a slower rate than we have seen in the past."
Aberdeen Fondsmanagement Team, "Danske Invest India A" (06.10.2010): "India and China are competing for resources, foreign investment and in trade. But actually they are very different. India is democratic, its companies properly commercial and respectful of shareholders. They speak English. This is not the case in China. We expect rivalry will keep India and China apart rather than bring them together. Many people will see China as having more potential, because it is better at planning and execution (its vastly superior infrastructure being a case in point). But as investors India gives us more confidence."
Pinakin Patel, Portfolio Manager, "JF India A Dist USD" (06.10.2010): "The China growth story started 35-38 years ago with the opening up of the economy. The Indian economy has only opened up in the last 20 years. China has been further advanced in the opening up compared to India. Another contrast is also the fact that India is a democracy and China is a planned economy which was able to organize itself that much more rapidly. That is also reflected in the amount of infrastructure which has been spent in India and China where India will probably also lag behind. The democratic system means that investment and development projects take so much longer to be realised. After independence in the 1950s India built no major infrastructure for nearly sixty years. Only twenty years ago India started to rebuild. India and China cannot be compared in this respect. The two countries are at different stages. But it is not so much a question of China or India but China and India. Both countries will also compete for strategic assets in Africa. It is also important to factor in the political relationship.
e-fundresearch: "Which over- and underweight positions are currently implemented in your India equity positions?"
Manish Sha, Co-Fondsmanager (Lead-Fondsmanager Wojciech Stanislawski), "Comgest Growth India" (05.10.2010): "The overweight and underweight positions can be seen below:
Please consider that we are active managers with a stock picking approach and we use a benchmark for comparative purposes only! There are 30 to 35 stocks in a typical Comgest Growth India portfolio. We believe that this number of stocks is enough to meet diversification criteria."
Richard Chow, CFA, Head of Asia Ex-Japan Growth Equities, "ACMBernstein – India Growth Portfolio" (06.10.2010): "As of 31 August 2010, AllianceBernstein’s India Growth Portfolio (the Portfolio) has overweight positions in the financials, healthcare and industrials sectors.
Financials: An operating framework designed to foster stability helps to make India’s banks appealing to us. Strict regulation and an absence of foreign players are a check against the kind of margin and value eroding behavior that can arise in ultra-competitive markets.
After going through a quieter path last year, the Indian economy has firmly returned to the growth path and credit is expanding at around 25% on an annualized basis. The economic upturn has calmed previous investor qualms about the potential for deteriorating asset quality and the specter of a bad loan problem.
Gently rising interest rates are also Indian banks’ ally. Moderately higher interest rates coincide with economic strength, rather than foreshadow calamity. Slowly rising interest rates widen banks’ net interest margins as loans (assets), get repriced before deposits (liabilities). Furthermore, with many deposits paying little interest, Indian banks bask in large, low-cost funding bases.
Healthcare: We believe the healthcare sector is an underappreciated part of Indian industry. We are particularly attracted to healthcare equipment providers such as Opto Circuits. Indian firms like Opto Circuits are makers of low-cost, innovative and world-class products including pulse oximeters, fluid warmers, cholesterol monitors and recently stents.
Industrials: India’s industrialization and urbanization attracts us to its industrial companies, especially engineering and construction firms at the forefront of the country’s modernization drive. Around 30% of India’s people live in urban areas versus 45% in China and rates exceeding 80% in developed countries like the US, Japan and Germany. The pace of Indian urbanization is stepping up and this is positive for engineering and construction companies building the residential housing, roads and other economic infrastructure needed in its growing cities.
By contrast, the Portfolio is underweighting the materials, consumer discretionary and consumer staples sectors. In the materials sector, downward pricing pressures are likely to hurt non-ferrous metals producers, according to our research. However, in the materials arena, we do continue to like steel companies as they are participating in the dynamic driving engineering and construction stocks, as described previously.
Escalating raw material costs and tougher competition, which will depress the margins of consumer discretionary and consumer staples providers’ margins, in our judgment."
Pinakin Patel, Portfolio Manager, "JF India A Dist USD" (06.10.2010): "Our sector breakdown is as follows. We have a large overweight in financials, a large underweight in materials, telecom, consumer staples and a small overweight in consumer discretionary. The themes we follow in the fund are still infrastructure, consumption and demographics. We view financials as a play on economic growth. Information technology is in line with the market. Health care and consumer staples became very expensive and there are only a few individual stocks who are attractive."
e-fundresearch: "Please comment on the performance and risk parameters of your fund in the current year as well as over the past 3 and 5 years."
Manish Sha, Co-Fondsmanager (Lead-Fondsmanager Wojciech Stanislawski), "Comgest Growth India" (05.10.2010): "Till September 30 ytd the NAV of the fund has grown 20%. It has outperformed the MSCI India index by 1.7% which has risen 18.3%.
In the past 3 years from Sep 2007 to Sep 2010 the NAV of the fund has grown by 28.17% (CAGR of 8.6%) against a 4.67% (CAGR of 1.53%) increase in MSCI India Index.
In the 5 years from Sep 2005 to Sep2010 the NAVof the fund has growth by 173% (CAGR of 22.27%) against a 139.9% (CAGR of 19.13%) growth in MSCI India Index.
The strategy of the fund is to invest in strong franchisee at reasonable valuations. The prime consideration in investing is to protect capital more so in markets displaing bubble like tendencies."
Richard Chow, CFA, Head of Asia Ex-Japan Growth Equities, "ACMBernstein – India Growth Portfolio" (06.10.2010): "The Portfolio’s performance record is strong. Since its inception in December 1993, the Portfolio has beaten the benchmark Bombay Stock Exchange 200 Index by 7.5% (annualized outperformance measured in USD) for the period to 31 August 2010. It has also been ahead of the benchmark over the one-, three- and five-year periods ending 31 August 2010, when the benchmark returned 23.82%, 2.51% and 16.35%, respectively.
The Portfolio does not own more than 10% of any single stock. For stocks higher than 5% of Portfolio, the aggregate weight of those stocks is no more than 40% of the Portfolio."
Sanjiv Duggal, Fondsmanager, "HSBC GIF Indian Equity AD USD" (07.10.2010): "Our flagship fund, HSBC GIF Indian Equity has returned 3,50% (1.10.2007-30.9.2010) over 3 years and : 121,95% (1.10.2005-30.9.2010) over 5 years, for the period ending 30 September 2010."
Nick Scott, Fondsmanager des "BGF India Fund A2 USD" (07.10.2010): "The BGF India Fund has a flexible investment approach and can adopt a growth or value stance depending on prevailing market conditions, thereby offering investors an “all-weather fund”. The investment philosophy of the BGF India Fund is to seek consistent, long-term returns by adopting a research-based, methodical approach to investing. During the current year (YTD August 2010), the BGF India Fund has shown strong performance of 8.0% against the benchmark which gave returns of 4.1% during the same period, placing the Fund in first quartile within the peer group (as per Morningstar). Over the past 3 and 5 years as well, the Fund has good performance and ranks in second quartile across these time periods."
Aberdeen Fondsmanagement Team, "Danske Invest India A" (06.10.2010): "We´re conservative stock pickers. We don´t define risk quantitatively -- it´s all a question of how we view the companies and whether we trust them. In the past three years we´ve outperformed our benchmark MSCI India as we didn´t participate to the full extent in the 2007-8 rally, being sceptical of its foundations. We have made up for that since, but we still have to catch up on five-year performance."
Pinakin Patel, Portfolio Manager, "JF India A Dist USD" (06.10.2010): "Performance in the current year has been good and encouraging as we focused on growth and some of the financial stocks and industrial stocks have performed very well. Being underweight telecoms and low growth sectors like utilites has been positive. We have also been underweight cyclical and material stocks. If we look at the past three and five years we underperformed the benchmark considerably in 2009 which was due to higher cash levels, a wrong reading of the election. When the market rallied a number of stocks with high gearing performed well but we continued to invest in well managed companies with a long-term business model. The performance was also impacted by stock specific issues in the telecom sector. But we evaluated our process and felt comfortable with the way we look at stocks. 2010 has been a better year for us. 2007 we outperformed the benchmark, in 2008 we were marginally up as well. YTD 2010 we are up about 3,5 percent."
e-fundresearch: "Where do you see risks for Indian equities?"
Manish Sha, Co-Fondsmanager (Lead-Fondsmanager Wojciech Stanislawski), "Comgest Growth India" (05.10.2010): "At the moment it seems that too much foreign money is chasing few large cap index stocks. $ 5.4 bn of FII money has come in the month of September against $ 13 bn till August. The MSCI has moved up 16.3% in September against 1.8% ytd till August. The rupee has appreciated 5% in September. So the risk is in valuations of the market. We at Comgest feel valuation discipline is very important as we don’t want to overpay for high quality companies – we are willing to be patient to ensure the appreciation potential we estimate can be realised. So, in such an environment it becomes important that you follow your investment strategy how we do it since the launch of Comgest Growth India. Making long-term investments in companies that meet our strict quality characteristics, including strong earnings visibility, exceptional business franchises, low cyclicality, high returns on equity, sustainable profit margins and self-financing capabilities should allow us to achieve above-average returns at below-average levels of risk over the long term."
Richard Chow, CFA, Head of Asia Ex-Japan Growth Equities, "ACMBernstein – India Growth Portfolio" (06.10.2010): "The Indian economy, as well as society, is sensitive to the inflationary pressures than can be provoked by bad weather, especially poor rainfall. In recent years, poor rain has been a blow to food production and the resulting shortages have been a force for higher inflation. This year, however, the monsoon has been good and consequently food production is reassuring.
Mindful of the vulnerability of rural India, the government has put in place the national Rural Employment Guarantee Scheme, which provides income support in the event of hardship brought out by events such as inadequate rain. A price support scheme has also been established to provide a floor for farmers’ income.
India-watchers sometimes cite the country’s current account and budget deficits as sources of concern. Anxiety about the twin deficits is overdone, however, in our view. Drawn by India’s economic vigour, foreign direct investment is upbeat and foreign creditors are confidently lending to finance the twin deficits. Admittedly, a global economic downturn and international liquidity crisis would upset the picture, but we think those prospects are remote."
Sanjiv Duggal, Fondsmanager, "HSBC GIF Indian Equity AD USD" (07.10.2010): "The key risk is that the Government stalls on taking critical decisions on reform. The other risks, in the short and medium term, are changes in the global liquidity position and in global risk appetite. A sharp rise in the price of oil or other key commodities could also detract from India´s growth."
Nick Scott, Fondsmanager des "BGF India Fund A2 USD" (07.10.2010): "Domestically we do not foresee any risks to corporate earnings growth in FY11/ FY12. However, external risks do remain. If risk aversion were to increase globally due to continued economic weakness in the developed economies or if sovereign credit issues begin to cause more investor concern, then it is possible that equities globally may face negative sentiment and we could see a reversal of capital flows."
Aberdeen Fondsmanagement Team, "Danske Invest India A" (06.10.2010): "From a market perspective, foreigners have been strong buyers (a net US$17bn this year). But it is arguable that they have been buyers for fundamental reasons, as global liquidity has been chasing returns wherever it can find them. If foreigners´ risk appetite changes, the market is vulnerable."
Pinakin Patel, Portfolio Manager, "JF India A Dist USD" (06.10.2010): "Geopolitical issues are important and will be relevant in the longer term, especially the relationship with Pakistan and China. These relationships are not as tense as they were in the past. Another area to monitor are deficits."
Alle Daten per 28.09.2010 in Euro: