John Ewart, fund manager at Aubrey Capital Management, explains why he is heavily overweight India compared to the MSCI EM Index. China, on the other hand, is slightly underweight. How did this decision come about?
"India has a number of positive factors that support economic and business growth, such as positive government policies, an ideal population structure, accelerated urbanization, and a growing middle-class consumer base."
"There are also some very well-managed, high-yield growth companies to invest in, and many of them have been competing with multinationals for decades. India will be the third largest economy in the world in the next few years, we believe that any Asia or emerging market fund should have significant exposure to India.
It's important to note that we invest in companies, not countries. Our exposure to India is high because we have found stocks there that meet our strict investment criteria. We are currently more cautious on China, but we are investing in excellent companies with significant cash generation and growth prospects."
India on the rise
"China's population is on the verge of peaking, but various international agencies predict that India will continue to rise to 1.7 billion people.
India has not only replaced China as the world's most populous country. Some experts also talk about India taking on the role of China as the "workbench of the world". Several international corporations have already opened new production sites in India.
India's domestic consumption has been attractive for many years and the presence of many international companies such as Nestlé and Unilever reflects this. The Indian Tata Group has been around for over 150 years and has developed many companies and industries during this time. It's the Indian companies that appeal to us. These domestic champions are often established brand names with experienced corporate leadership and excellent knowledge of changing population trends domestically."
Desire for more
"The big picture supports the reform of the Indian government and the expansion of infrastructure. The educated and urban population enjoys the creation of real incomes as well as wealth; and the consumer uses services and products, from e-commerce shopping to their mobile phone, to Pepsi soft drinks and enjoying the air conditioning in the shopping malls. However, this is only a small fraction of the population, and the longer-term chance of another billion and more inspires confidence for decades to come."
Aubrey Capital Management/HK