Investors should look at India
Investors looking to increasing their exposure in Asia should be closely following what is happening in India, which is set to become ‘the critical issue’ over the next few years, according to Nikko Asset Management.
With a growing and much younger population than China and a range of well-known and long-established companies India might look very much of where China was 15 to 20 years ago.
However, according to Nikko AM’s senior portfolio manager, Asia equity, Rob Mann, it would be essential for the country to carry on with the reforms and its future would highly depend on the ability to deliver jobs for its growing labour force.
At the same time, investors would need to embrace the big change when it comes to the traditional perception of the Indian economy, associated so far largely with the Indian IT workers and providers, and often referred to as an ‘old India’, against a growing consumption side which would be driven by sectors such as infrastructure, property and banking.
“India seems to be accelerating at the moment .When I look at the Asia at the whole, over the next two years, the critical issue is actually India, because India is the same population as China virtually but India is a young population where obviously China is aging,” Mann said.
“You have huge labour force and a growing labour force and reforms happening. [And] you have a prime minister who is very reform-minded.
“In short-term India looks very expensive but in the longer term that is I think the critical thing.”
On the other hand, China continued to see a huge underrepresentation of the foreign institutional investors and a ‘mismatch’ that existed due to the lack of foreign portfolio investments in China.
“So that’s one of the biggest economies in the world and yet virtually no one has got any Chinese bonds” Rob said.
Mann also stressed that although China ‘was working hard’ to become more attractive for those investors but it was still difficult for the average Australian investors to get the access to the information on companies inside China.
As far as the sectors were concerned, Mann said: “Because you don’t get really access to – it’s hard to generalize and I would say that probably – you’ve got to look at the sectors that look attractive and then you try to find companies within those sectors an in a very general sense,”
“As China moves to that next stage and its economy is now much larger is where the big growth is in the middle class and is sort of the middle class consumption” Mann said.
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