“We own a range of different financials. We own some banks at the high quality end. One example is an Indian bank called Yes Bank. It has a good credit quality history with low numbers of non-performing loans and has grown well in the SME area, while expanding its consumer market share.”
Rowsell adds: “We are cautiously optimistic on India generally. We feel that the Modi reforms are the right approach although it’s a slow burn. The key one we are waiting for is reform of the goods and sales tax, their version of VAT.
“They are moving to a flat rate across India rather than different rates across the various states. We are hopeful that will be implemented later this year.
“Banco Popolare di Milano is another we own, based on it being the highest-quality bank of its kind in Italy.
“I think it is going to benefit from consolidation in the sector as well as various reforms happening in Italy, such as bankruptcy rule changes that could lead to improvements in the performance of its loan book.”
Rowsell describes himself as “very cautious on China” and has no direct exposure in his fund at the moment. “The Chinese economy certainly appears to be slowing down. There is also a non-performing loan problem in their banking sector,” he says.
Looking forward, a key focus for Rowsell will be watching for a turnaround in emerging markets and the energy sector.
“We are watching closely for signs of improvement but we have not seen any yet. We cut back our exposure to oil around the end of 2014 and in early 2015 so we avoided much of the fall. A major theme has been the decline in commodities and the resulting pressure in emerging markets. We do not see that turning around yet.”
