Jpmorgan Indian Investment Share Discussion Threads

[loganair] 06/12/2017 11:51

hazl - Usually I give information which an investor or potential investor may use how they feel fit.

Occasionally I will give my personal experience of living or working in a particular country or region.

I know the Indian sub-continent pretty well and have worked with many people from the area as I have Africans and Africa, Indo-China and the Far East.

In my personal experience why I think there is virtually no chance of China militarily taking on Taiwan and an at least 50/50 that one day South Korea either on its own or with the help from its allies will take out North Korea.

[hazl] 06/12/2017 11:38

LOGONAIR keep up the good work thanks.
As I have said before I enjoy your posts they leave the discerning reader to
interpret.

[loganair] 06/12/2017 08:56

I stick with 'close end' investment trusts rather than 'open end funds' or 'Unit Trusts.'

[0x3f] 05/12/2017 12:06

Thanks, another one for me to look at.

[0x3f] 28/11/2017 23:26

Interesting comments. I'm wondering whether either of you have a strong opinion on the merrits of this trust v's the Aberdeen ANII? I'm guessing you prefer this, as posting here.

I'm not a holder of either, but was leaning towards ANII, due to the large financials weighting here.

[loganair] 27/11/2017 19:35

Market outlook 2018: Morgan Stanley more bullish on China than India

Morgan Stanley has reduced the size of its overweight rating on India for 2018 to accommodate Brazil's upgrade to the overweight category where they expect a significant economic growth. China is its biggest overweight in the global context.

"We reduce our overweight on India from +250 basis points (bps) to +150 bps previously. Key bull points for India in terms of the country model are increasing dividend yield trend relative to its country peers, combined with constructive views from our economist and country strategist. Weaker scores for India are its weak return on equity (ROE) and net margin trend," a Morgan Stanley report co-authored by Jonathan Garner, their chief Asia & emerging markets equity strategist says.

However, they believe India is likely to remain in the midst of a domestic liquidity super cycle. Over the next 10 years, it expects $420 billion - $525 billion in domestic equity inflows that could have the power to keep India's relative multiples higher for longer. That said, the two key risks for India, according to the research house, are the rising oil prices and the fact that 2018 will see a number of state / assembly elections, which can keep the markets volatile.

Going ahead, Morgan Stanley expects 2018 to be a tough year for the markets even though there are catalysts supportive of a continued rally. Central bank tightening globally and balance-sheet reduction in the US, slowdown in growth in China, busy election calendar in the Asia pacific region (ex-Japan) and a rise in oil prices are some of the key things that the markets will have to grapple with.

In the Indian context, the research house expects the real gross domestic product (GDP) growth to accelerate to 7.5% in FY19 and to 7.7% in FY20, from 6.7% in FY2018, as the economy has already worked off the headwinds posed by demonetisation and the implementation of the goods and services tax (GST) bill. A pick-up in growth and consumption, in turn, will help boost private capex.

In terms of sectors, they still continue to prefer banks; remain overweight on capital goods, food & beverage and tobacco sectors. Pharmaceuticals, household and personal products (FMCG) remain their key underweights in the Indian context.

"For India Household & Personal Products, stocks look rich and margins are likely to decline due to higher material costs and competition, and are therefore a headwind to the earnings outlook. We also remain underweight on the largest pharma name - Sun Pharma - where we believe earnings should compress in the near term in view of lower US business - lack of new approvals, delay in Halol resolution, pricing risk at Taro portfolio - and higher opex (specialty front-end/R&D)," the report says.

[loganair] 10/11/2017 09:46

Can emerging markets maintain their momentum? By Graham Smith:

When markets surprise, they have a habit of doing so in a big way. This wasn’t supposed to be a great year for emerging markets but, so far, it has been. The MSCI Emerging Markets Index went up by almost a third in US dollar terms over the ten months to the end of October¹.

Rising interest rates in the US have the potential to apply a substantial headwind to emerging markets. They make it relatively more attractive for global investors to plant their money in US assets and avoid the additional risks associated with smaller, developing countries. At the same time, higher US rates make it more expensive for nations dependent on foreign loans to service their existing debts and borrow more.

As always though, we find ourselves somewhere between two big pulls. On the other end of the rope this time is economic growth. In a developed world where growth of 2% to 3% is considered strong enough to withstand rises in interest rates, the International Monetary Fund’s expectation that emerging markets will continue to grow at a rate of about 5% per annum looks impressive².

So where is the growth coming from? For a start, China seems on course to expand by about 7% this year. While that’s a big step down from the 10% growth rate we saw earlier this decade, it’s still enough to belie some extraordinary progress. Online sales of physical goods were 29% higher in the nine months to September compared with the same period in 2016.³

That’s good news for the host of nearby countries that send exports to China. Malaysia, for instance, which sells components used in the latest generation Apple and Samsung smartphones, said last week that exports to China were up 27% year-on-year in September⁴.

Then there’s Brazil, in a much weaker position, but with prospects improving. Following a damaging two-year-long recession, a rebound in consumer spending stabilised the economy in the first half of this year ⁵.

India, almost the world’s fastest growing large economy in fiscal 2016-17, has slowed as the country absorbs the combined impacts of last year’s cancellation of high value bank notes and the introduction this year of a national goods and services tax. However, these effects are only expected to be transitory, turning positive for the economy longer run according to the World Bank⁶.

Since corporate earnings have broadly grown in step with stock market gains this year, emerging markets continue to look attractively valued on a relative basis. At the end of last month, the MSCI Emerging Markets Index traded on 16 times the earnings of the companies it represents, and at a 23% discount to world markets generally.

That valuation gap is more or less maintained when using forecast earnings – 13 times for emerging markets versus 17 times for the world⁷.

You could, perhaps, explain away these mismatches by the risks that remain. Capital has continued to flow into emerging markets, even as US interest rates have gone up. As in the period 2003 to 2006, emerging markets are enduring rising rates, partly because those rises have coincided with healthy global growth⁸.

However, that could still be undone by any factor that sees the US dollar returning to favour, particularly if that factor involves a rise in geopolitical stress or unexpected deterioration in the world growth outlook.

That would place renewed pressure particularly on countries with US dollar currency pegs and large debts. Malaysia would be one – its banks are highly dependent on dollar funding⁹.

As usual, investors seeking to add growth from emerging markets to their portfolios might do well to spread their risks. Fortunately, emerging markets are a heterogeneous mix, with commodity producers like Russia, Indonesia and South Africa included alongside the increasingly consumer oriented markets of China and India.

[loganair] 06/10/2017 10:32

India: wait for the breather then buy in:

India has potential. Prime Minister Narendra Modi is trying to make “what already exists work better”. His recently introduced national goods and services tax, for example, means you can now drive a lorry from city to city without adding in an extra day for stopping to pay cash bribes. “Keep taking out the bureaucracy and the ability to offer a bung” and eventually you will get somewhere. The man in the street sees this, says Greenwood of Miton Global Opportunities– so they will put up with short-term disruption for long-term gain.

All the changes designed to promote the formal economy at the expense of the informal will give a “structural advantage to listed companies”. And India is one of the few emerging markets that offers real depth: it’s been there since 1895, so if you want someone making anything from “bicycles to skin-whitening cream” you can genuinely stock pick. Both of these things mean that a good manager has a better chance of outperforming in India than in most other emerging markets. That said, Greenwood wouldn’t necessarily urge anyone to dive in for the short term: the market’s been a fabulous performer this year and, with price/earning ratios averaging 18-19 times, it is now “desperately in need of a breather”. He has “top sliced” his holding with this in mind (while reminding me that attempting to time the market too closely is a fool’s game). You should wait for the breather and then have a look at it.

[loganair] 27/9/2017 11:23

The “more disruptive than expected” impact of demonetisation and the goods and services tax is set to slow India’s economic growth down to 6.7% in 2017-’18, India Ratings and Research said on Wednesday.

The agency revised its outlook following continued slowdown in the first two quarters of 2017. The GDP growth had reached a three-year low of 5.7% in the quarter that ended in June. In the first quarter of 2017, growth had slowed to 5.7% from 7.9% in the same period last year.

The negative impact of the new indirect tax system will reverse eventually, but the same cannot be said about the impact of demonetisation, India Ratings said.

However, growth will recover in the July-September quarter as the impact of demonetisation is waning and the government is looking into the problems in the implementation of GST, the agency said. The festival season will also support growth.

The unorganised sector and small and medium enterprises have not yet recovered fully from the government’s exercise to remove high-value currency notes last November, without quickly replacing them, the agency said.

The rollout of the GST was “fairly smooth” but destocking by manufacturers before it and the loss of liquidity for exporters due to delayed tax refund have affected business activity, according to the agency’s report.

Slow growth in industrial output and bank credit make the economic landscape “not very encouraging”, India Ratings said, adding that though the government seems to be planning a stimulus package, the fiscal space it has to do so is “questionable”.

Recently, the UN Conference on Trade and Development had also lowered its growth projection for India from 7% in 2016 to 6.7% in 2017.

[loganair] 27/9/2017 11:18

Wings have fallen off our plane: Rahul Gandhi on India's economy 'mess':

NEW DELHI: The Congress, led by party Vice President Rahul Gandhi, on Wednesday launched a frontal attack on the Modi government over the state of the economy, after BJP leader Yashwant Sinha aired his views on the "mess", and warned people to brace for tougher times ahead.

"Ladies and gentlemen, this is your copilot and FM speaking. Please fasten your seat belts and take brace position. The wings have fallen off our plane," Gandhi tweeted while sharing the article Sinha wrote in he Indian Express, critical of Finance Minister Arun Jaitley.

In the hard-hitting remarks, Sinha, who was the Finance Minister in Atal Bihari Vajpayee's government, lashed out at "superman" Jaitley for making a "mess" of the Indian economy which is headed for a "hard landing" as sector after sector is slipping into distress.

Sinha claimed that his views reflected the "sentiments of a large number of people in the BJP and elsewhere who are not speaking up out of fear".

Former Finance Minister and senior Congress leader P. Chidambaram said Sinha had spoken the truth and shown mirror to the government by noting that had it not changed the methodology for calculation of the GDP in 2015, the growth rate of 5.7 per cent would have actually been 3.7 per cent or less.

"Yashwant Sinha speaks 'Truth to Power'. Will Power now admit the Truth that economy is sinking?," Chidambaram tweeted.

Referring to Sinha's article in which he also wrote that when the BJP was in opposition, it was against the "raid raj" but now it seems to have become the order of the day, Chidambaram said: "Instilling fear in the minds of the people is the name of the new game, says Yashwant Sinha."

"Eternal truth: No matter what Power does, ultimately Truth will prevail," said Chidambaram.

Congress spokesperson Randeep Surjewala said Sinha had "rightly spoken as to how an experimental Finance Minister and an autocrat Prime Minister can wreck India's economy" and that it was the "time for the people of this country to seek the relevant answers both from Arun Jaitley as also from Narendra Modi".

Surjewala said the facts and figures point to how the "economy is in a state of flux" in India.

"The GDP has fallen from 9.2 per cent to 5.7 per cent and as per old (methodology of calculation) will be about 3.5 per cent. NPA in this country has risen to Rs 11 lakh crore, share of exports in the GDP is at 14 year low of 19.4 per cent, private investment and gross capital formation as percentage of the GDP in 2016-17 is actually at a low of 14 years. Credit growth is lowest in the last 63 years, manufacturing PMI is at a low of eight years, inflation is at a five month high.

"On top of that there is Rs 2 lakh, 67 thousand crore of revenue being collected by the government of India through taxes on petrol and diesel. The Prime Minister only speaks and the Finance Minister only mismanages the economy."

[pjw956] 26/9/2017 20:51

wobbles in india - back under 700p , modi under pressure....

[loganair] 19/9/2017 18:58

India: the "almost-perfect" emerging-market investment story by Merryn Somerset Webb, Editor in chief, MoneyWeek:

Want to ride on a Shinkansen? Of course you do. Everyone wants to ride on a bullet train. But unless you get to Japan at some point in the next few years, you might find that most of India rides on one before you do.

This week, Japan’s prime minister Shinzo Abe headed to India to lay the first stone in a Japanese-financed $17bn bullet train project set to cover the 310 miles between Mumbai and the industrial city of Ahmedabad. This is exciting stuff. That’s partly because bullet trains are amazing in themselves – this one will cut the journey time from eight hours to under three.

It is partly because the Japanese have offered a fabulous deal on the finance – and are signing various other investment deals along the way. But the really interesting thing is the speed of delivery of the project: India’s prime minister Narendra Modi first decided to bring high-speed trains to India only two years ago.

Two years from thought to first stone laying is quite something for a major infrastructure project. For comparison, you might note that the new tram system in Edinburgh, where I live, was first proposed in 2001. It was completed in 2014. It covers 8.7 miles. Very slowly.

“My good friend prime minister Narendra Modi is a far-sighted leader”, said Abe this week. Such compliments are a rare thing in politics. Perhaps Modi is far-sighted; it is certainly true that he is prepared to make decisions that bring nasty short term pain – and hit growth – with a view to long-term gain.

Late last year, he brought chaos to India’s economy with the abolition of two large-denomination banknotes in an attempt to move towards a clean and taxpaying digital economy. The consumer economy stalled; there were huge lines at the banks; and everyone working in the black economy found themselves having to choose between coming clean or losing their savings. But Modi held firm.

He has done the same with this summer’s implementation of a national goods and services tax. It has subdued growth across the board – but should pay huge dividends as it slashes corruption, simplifies the tax system and boosts revenues.

This is all good. But it is just the icing on the cake of an almost perfect emerging-markets story. India has fabulous demographics (two-thirds of the population are of working age); a booming middle class keen on consumption; a fast-shrinking current account deficit (under 1& of GDP); a government committed to housing and infrastructure spending (there is a kind-sounding “Housing for All” scheme on the go); and a low fiscal deficit (down to 3.5%).

It also has a high level of foreign-exchange reserves (about $400bn) and inflation looks to be properly under control (down to more like 2% nowadays, compared to about 6% a year ago).

Some of these things could reverse if the oil price rises again – the current-account deficit would rise again, for example. But for now, while there are some worries around employment and credit growth, the macro environment looks mightily impressive (imagine how thrilled we would all be if the UK’s numbers looked anything as good).

India’s stockmarket looks good, too. It is one of the few emerging markets with real depth and breadth: you can get exposure to pretty much any part of the economy you want via a listed company (not all are top quality, of course, but that’s not exactly an emerging-market specific problem).

Finally, it is worth noting that India’s stockmarket is supported by local investors rather than just by the fickle international investors who cause so much volatility in emerging markets (they were the ones who sold so energetically when Donald Trump was elected and when the geopolitics around North Korea started to heat up last month, for example).

You will all be wanting to rush in...

[loganair] 14/9/2017 08:04

Indian economy is going through a 'dense fog'; will be a 'drag on growth': Credit Suisse:

Describing Indian economy to be in a period of "dense fog", Credit Suisse today said structural reforms including GST has introduced significant uncertainties related to growth, fiscal health, inflation, currency and the banking system in the country, for the near term.

Credit Suisse' India Equity Strategist Neelkanth Mishra told reporters here that the "Indian economy is going through a period of dense fog" with uncertainty of macro-economic variables by itself is likely to impede investment intentions and act as a drag on growth, causing downgrades to GDP as well as earnings estimates for the next financial year".

Terming the Indian economy as "a house under renovation", Mishra said, "a number of structural changes like the exodus of millions of workers away from agriculture, the introduction of GST, the Real Estate (Regulation and Development) Act and the Bankruptcy Code are breaking down vicious cycles that the economy was trapped in".

"However, they also introduce significant uncertainty on several macro-economic variables in the near term: growth, fiscal health, inflation, currency and the banking system," Mishra added.

According to findings by the financial service major, government spending growth is slowing down sharply, while half of the population is seeing weak income growth.

"Despite good monsoon resulting in agriculture volume growth pickup in 2016-17, low food prices moderated overall gross value of output," Mishra said.

Further, he also said that various indicators like oil demand is still weak although it is showing a pick up.

"Oil demand growth which turned negative in February 2017, is picking up now but is still weak, also cement demand weakened sharply post demonetisation has turned positive in May this year, but still needs to show signs of recovery," Mishra said adding that there is uncertainty if such weak indicators "are temporary".

However, Mishra observed that a weak economy would not necessarily result in markets also doing badly and said that a sharp correction in the markets at this time would only be because of global factors.

Noting that markets and the local economy are not always in sync, Mishra said that 25 per cent of the BSE500 market capitalisation is almost completely driven by global factors, 22 per cent by local macro-economic situation, 42 per cent from penetration-driven stories and 11 per cent by market share (private sector banks and telecom).

"The markets and the economy are weakly linked, and there are pockets of growth even in this otherwise weak economy, such as high-end discretionary consumption, and beneficiaries of higher financial savings," he added.

On RBI interest rate cuts, Mishra said that "the economy is "in a period of uncertainty and rate cuts may not happen in next 3-4 months, we will get meaningful rate cuts in next 9-12 months".

[loganair] 14/9/2017 08:01

Is bad advice driving India’s irrepressible bulls?

Unless investors go into an emerging market like India with their eyes open, with the right advice and with caution, they’re setting themselves up to get burned.

India’s economy is not doing as well as many had hoped. Growth has been slowing for several quarters, and even if there’s a slight recovery in coming quarters, the signs for the medium term aren’t propitious. There appears to be no end in sight to a slow-moving banking crisis. And private investment has crashed, reflecting pessimism at Indian businesses about the future and possible returns. India’s government looks less and less likely to carry out the kind of deep reform that the country’s economy needs, while its inexplicable decision to withdraw 86% of the country’s cash overnight—a decision that was as badly implemented as it was poorly conceived—has gravely damaged Prime Minister Narendra Modi’s reputation as a manager of the economy.

So the question is: Why aren’t these facts, which are easy to ascertain, reflected in the giddy statements regularly made about the Indian economy, especially by analysts and advisers to global investors?

The answer goes to a problem at the heart of how global finance is organized. Economic theory tells us that advice is only as good as the incentives of the adviser; if he or she will do better by insisting things are good than they would by saying they are bad, then there’s a strong bias toward the construction of a narrative that all is well.

That’s part of what’s going on in India. A friend of mine a long time ago gave me a useful piece of advice: When asking questions about India or any other emerging market, never go to a sell-side analyst. Always ask the buy-side person—the one who actually has to make choices, not the person offering them. I’d actually go further and suggest a simple rule: When Indian businessmen and investors are acting cautious, it’s that caution I would heed.

Consider how odd and illogical our general approach to investing in a strange market is. We rely for advice on those who have a clear interest in talking up that particular market. Giant firms and global investors behave, in this respect, like an old lady convinced a door-to-door insurance salesman is giving her the best possible advice about which plan is right for her. Investors who would never for a moment consider investing in a company on the basis of a headline, a quick trip to the office, or a word from an investment adviser with dubious incentives are doing exactly that on a global scale when it comes to evaluating entire economies.

Even if you go to someone who has an interest in emerging markets overall rather than in one in particular, you might not be able to overcome this problem. Will that specialist ever turn around and say: “Look, at the moment, no particular emerging market looks great”? No, she will emphasize the qualities of the one that looks the best. This dynamic is helping to boost the India story right now, given that its macroeconomic numbers look stable and are easy to talk up—even if the stability is essentially fragile and dependent upon low energy prices.

If you are serious about investing in emerging markets in the long term, ensure you have people who understand those markets in the long term—and that their incomes and career trajectories aren’t linked to the advice that they give. If you hire, say, a Southeast Asia specialist who imagines that if she says Southeast Asia isn’t a good destination for the next couple of years, she’ll lose power in your organization, then, once again, you’re setting yourself up for bad advice.

It’s a fact that there are a lot of great opportunities out there—yes, even in over-bought India, if one looks carefully. But unless investors go into an emerging market with their eyes open, with the right advice and with caution, they’re setting themselves up to get burned. Look beyond the headlines and the sound bites, the executive summaries and the pretty graphs. Somewhere beyond them is where the truth lies.

[loganair] 30/8/2017 10:53

India’s economic growth is likely to remain “soft” and the GDP is expected to grow by 6% in April-June, down from 6.1% in the preceding quarter, says an HSBC report. According to global financial services major, higher private consumption and government spending is likely to be “dulled” by weak investment and exports growth over the quarter.

“Repercussions of an early budget and the newly implemented Goods and Services Tax (GST) rates, receipts and rebates are likely to distort upcoming GDP readings,” it said. The report said the Gross Value Added (GVA) may be a more reliable measure of economic activity over the next few quarters amidst policy changes like the demonetisation episode (8 November 2016) followed by GST implementation (1 July 2017).

“Sandwiched between demonetisation, GST and other smaller policy changes, we recommend relying more on GVA as a measure of economic growth rather than GDP,” it said. “We expect GVA growth for the first quarter of this fiscal to come in at an improved but still soft 6.2%, and GDP a tad lower at 6%,” HSBC said in a research note. The report said the Union budget was released on 1 February, about a month in advance compared to previous years.

This allowed for faster approvals and front loading of certain expenditure, particularly subsidies. Besides, until the new system settles down, the GST tax regime could lead to uncertainties in tax collections, it added. “We expect first quarter GVA growth to recover to 6.2% y-o-y, from 5.6% in the demonetisation hit in the previous quarter,” it said adding despite the improvement, growth is likely to remain soft.

In fact growth has been falling singularly since mid-2016. On the production side, agriculture and trade services are likely to be strong and manufacturing is likely to improve in line with IIP data. However, financial services is expected to remain depressed, it added.