And this really is a very good thing indeed.
A look at one of the flagship funds, the Ashmore Chindia Fund, shows it has not been a great success with investors as, launched in 2006, it has just £25m in assets. Investors in emerging markets go global, with 70% of delegates at our recent Expert Investor Emerging Markets event saying they get their EM allocation through global emerging market funds rather than regional or single country funds.
None of them mentioned any specific Chindia allocation…
Taking Indian stock
Since 2006, the stock of each country from an investment point of view has changed, with talk of Chindia soon turning to just talk of China. Now, however, talk is centred on India (still not Chindia though…).
But it has a number of problems, headed by double-digit inflation that has been in place for at least the past five years with little sign of disappearing soon.
With one eye on the general election in May, the government ramped up interest rates by 0.25% to 8% a week or so ago to try and counter inflation that was 6.16% at the end of last year, close to its average inflation rate since the early 1970s of 7.7%.
New corporate activity has virtually dried up as chief executives switch to ‘wait and see’ who will win the election before committing to any further investment, despite the incumbent government providing funds for projects amounting to 3% of its GDP.
Corporate strife
According to research by JP Morgan, corporate revenue growth is falling, as are margins, with institutional investors turning to government securities instead.
Its economic backdrop is weak and weakening and stability is one thing it will need to allow it to fend off any fallout from the US Federal Reserve unwinding QE.
India is a stock-picker’s market and will be as long as the over-reaching economic background remains uncertain at best. It still offers investors – according to Sharat Shroff, manager of the Matthews Asia Pacific Tiger Fund, at least – the “opportunity of finding uncorrelated growth”.
The investment environment for India is one of low economic growth, rising interest rates, rising inflation and a lack of corporate business confidence this side of the election.
No wonder portfolio managers allocate to global managers to access emerging markets!
