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While the world is eyeing China as an emerging market, many U.S. fund managers have begun to pay special attention to another big country with more than one billion people: India.
Although the foreign investment attracted by India is far away from China, portfolio managers say that in terms of stock market investment, India is more attractive than China in many aspects.
In this large South Asian country, a large number of companies with international competitiveness and management styles that are closer to their US counterparts are born, including Infosys Technologies and Wipro, which are listed in New York, and Dr. Reddy's Laboratories. Compared with China, India has a better corporate information disclosure system, stronger protection of property rights and a more judicial system that is more friendly to investors.
India has lagged behind China by about 12 years in terms of economic liberalization, lowering tariffs, and opening up investment in foreign industries, but India is closing this gap. In fact, India recently raised the foreign investment ceiling on domestic private banks and removed restrictions on foreign companies investing in private oil exploration and sales companies.
The Indian government expects that India’s economic growth rate for the fiscal year ending in March of this year will be around 8%—this figure is in line with China’s official expectations for the economy in 2004, and India has rapidly emerged in the two business areas of outsourcing and customer service centers. , and maintain a leading position in the world.
Some economists said that India may be entering a period similar to China’s rapid economic expansion in the 1990s, which will allow India to become a major player in the emerging markets stage in the coming years. Investors are encouraged by India’s march in the direction of market reforms before the parliamentary elections in April and expect that India will speed up reforms after the election.
Mark Madden, who manages the Pioneer Emerging Markets Fund, said that “India seems to be at the start of an economic boom and the economy will continue for several years.†He listed India with Brazil and Turkey as this year. The preferred three investment countries.
Last year, foreign investment in the Indian stock market reached a record 7 billion U.S. dollars, which pushed up the rupee’s exchange rate against the U.S. dollar by 5% in 2003. In the same period, the dollar-based Bombay Sensex Index soared by 82%. (This year, the index has risen. 3.2%). According to Morgan Stanley, foreign fund managers increased their holdings of India's top 10 companies by 7.3%, and their total holdings accounted for 35.2% of the issued shares.
Some large global funds that have made some investments in emerging markets are eager for the Indian market. Shigeki Makino, senior manager of global portfolio at Putnam Investments, said, “Many of us are encouraged by the situation in India.â€
His fund purchased Reliance Industries shares last year and kicked off the investment in the Indian stock market. Reliance Industries is a large company that operates in telecommunications and chemicals. He said that the purchase of this stock is mainly optimistic about India's economic growth prospects and the stock's low price compared with its global peers, but he added that for large global funds accustomed to large investments, most Indian stocks The market value is too low to meet the demand.
Even if optimistic expectations for India can become a reality, the Indian stock market is still full of risks. Although the relations between India and Pakistan have recently been thawed, the future conflicts between the two countries will have an impact on the market.
U.S. politicians are also on the rise in their outsourcing of jobs to India. Not long ago, the Senate passed an amendment requesting restrictions on the outsourcing of work involving government contracts to overseas workers. New Jersey and Indiana state legislators have passed similar measures, which has aroused New Delhi’s anger and raised concerns about possible trade wars. Democrats and Republicans have already listed this issue as a campaign issue.
If the Indian public believes that it has not been fair to share the fruits of India’s economic growth, and India’s poverty is still widespread, then the resistance of the United States’ ruling coalition party against the people’s opposition to market reform will increase. In addition, backward infrastructure - from roads to ports to energy supplies - must be improved to reduce transportation costs and increase GDP.
Even if the Indian economy really achieves sustained high growth, this alone does not mean that investing in India must be a wise decision. Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, Scotland, said: “Investors are generally mistaken for equating rapid economic growth with strong stock market performance. This is not necessarily the case.â€
After the Indian stock market soared last year, some people think that the Indian stocks seem to be not cheap. But Maiden pointed out that some of the most expensive stocks have the highest growth rate. For example, Infosys’ current share price is 23.4 times its estimated earnings per share for the fiscal year ended March 2005, but it is expected that the company’s earnings per share will increase by 26% in the fiscal year.
However, he prefers bank stocks and believes that banks will benefit from India's economic growth. In recent years, banks are no longer required to lend to the agricultural sector at certain interest rates in accordance with government directives. Banks are shifting their focus to higher-margin consumer credit businesses. He has a soft spot for the Punjab National Bank, whose stock price is less than 7 times the estimated earnings per share for the fiscal year ended March 2005, and the bank's expected increase in earnings is 16%.
Bahartachager pointed out that unlike China, some Indian companies rely on exports to realize most of their income, while in China, few companies can interpret the "harmful" and "robbery." ??????? Harat Forge relied on exports to achieve 60% of its sales revenue, of which half came from the United States. About 50% of Ranbaxy's revenue is from overseas, and most of it comes from the US market.