Category — Banking & Financial Services

India’s High-Yield Bonds Fuel Overseas Investor Interest

With investor limits for India’s high return sovereign debt almost used up, overseas investors are looking to buy state notes. U.K. headquartered Aberdeen Standard Investments started buying the securities about three months ago and the investment now accounts for about one-fifth of its $312 million Indian bond fund.

Bloomberg Quint says: The highest yields among major Asian emerging markets have made Indian government debt a favorite with overseas investors, who have pumped about $20 billion into rupee securities this year. State bonds, which offer an extra 60-70 basis points of yield over the sovereigns, trade at very similar levels despite differences between the local economies. That’s because the Reserve Bank of India has a zero percent risk rating on the notes, meaning domestic investors treat the unrated securities like federal debt.

A case of dollar bills

Aberdeen’s Lin Jing Leong, a fixed-income investment manager in Singapore said, “We were one of the early asset managers to get into Indian state bonds. We’re definitely seeing others try and get on board.”

October 24, 2017   No Comments

Corporate America Bets on India

John Chambers, executive chairman, Cisco, and chairman, U.S.-India Strategic Partnership Forum says, “While India has long been an important global market, never before has it attracted so much enthusiasm from the American business community.”

Chambers attributes India’s economic transformation, from “slow follower to fast innovator in a matter of several years,” in large part to Prime Minister Modi’s ambitious economic reforms, reports Business Today.

PM Modi and John Chambers

PM Modi and John Chambers

So what are these changes, that Chambers thinks can propel India to be “the second largest economy by 2050“?

In his words…

Rebooting India’s Economy

Demonetizing India’s monetary system is a critical step towards dismantling the cash-centric black market and getting more of the population on a formal, taxable economic grid. The banking system will improve as India heads towards a cashless society, which will ultimately increase credit access and financial inclusion beyond reducing the “black economy.” More importantly, it moves India’s economy into the 21st century.

Adopting the Goods and Services Tax

The Indian government formally adopted the Goods and Service Tax (GST) to streamline the country’s complicated system of local and national tax levies into one payment. Some economic experts project that the implementation of the GST will increase the Indian GDP by 1 to 2 percent.

Propelling India into the Digital Age

Launched in 2015, his [Modi’s] Digital India program has committed unprecedented investments to building the country’s digital infrastructure. Of all the changes ushered in by Modi, I believe this will play the greatest role in providing jobs to India’s rapidly growing workforce, which grows by over 1 million new people each month. And this will not only impact India-collaboration on the digital front, it has the potential to uplift bilateral trade to new heights.

The Prime Minister has the ability to create a vision, communicate it well while building hope for its future, and eventually execute that vision – once he determines something is good for India, he is truly fearless.

October 12, 2017   No Comments

Matthews Asia: India is a fertile environment for an investor

In an interview with Morningstar, Robert Horrocks, Chief Investment Officer of Matthews Asia, the largest dedicated Asia-only investment firm headquartered in Westborough, MA, discussed the investment climate in India with senior editor Emma Wall.

Key takeaways from the interview:

On whether India has lived up to the investment hype under Prime Minister Modi

Horrocks: India has done very well apart from the last year or 18 months or so. But yes, I think, a lot of this was focused on Modi. But you got to remember he is the head of a central part of the government and he has to contend with all the states and the local governments. And that often means things move a little more slowly than you’d like.

On whether there is greater link between politics and markets in emerging markets as opposed to developed markets where the two things can be less connected

Horrocks: The reason for the connection between politics and the economy and the markets in India in particular is they are where China was 20 years ago. They need to build up the infrastructure. These are the things that governments are supposedly doing very well. So, that’s the reason for the linkage.

On the factors that will predict India’s stock market will deliver

Horrocks: Modi has done some things very well indeed. He has put in place a demonetization which I think I would said this would have had a much more detrimental impact on the economy in the short term. He has done some changes to the legal infrastructure to make bankruptcy law a little bit more clear. But these are things that take time.

The other thing I would mention is the achievements of the central bank. India used to be a high inflation economy. It was spending more than it saved. And the actions of the central [bank] over the last five years have brought that core inflation rate right down to a level where India’s savings are now pretty much able to mobilize all the investment it needs in the economy. The inflation rate is very reasonable even for a developed nation. So, it’s not just Modi. India has done quite a few things right.

On the greatest opportunities for an Asian investor

Horrocks: You still have to focus on the management of the business, you still have to look at the businesses that allocate capital properly. One of the issues with India at the moment is the fact that capital is scarce relative to other countries in the region. So, companies have to retain that capital themselves. That means you are putting a greater degree of trust in the management that they are going to look after that for you. So, that’s really the key. But India is a market [where] there’s opportunities across kinds of sectors. So, it’s quite a fertile environment for an investor there.

I would say the one element of caution I would have about India at the moment is the valuations. It is one of the more expensive markets in the region. You are right that a lot of hope surrounds Modi and the government and that’s been priced in a little bit to the market. So, you just have to be cautious and just pick your spots carefully.

But I do think corporate profit growth is still going to be pretty decent over the next few years.

Return on Investment

October 10, 2017   No Comments

India Sees Record Private Investment in Q3 2017

A report by Ernst & Young says that private equity/venture capital investments in India touched a record high of $8.7 billion in the  July-September quarter, a sharp increase over last year’s $3.1 billion for the same period.

E-commerce recorded $2.6 billion across 18 deals primarily driven by Softbank‘s $2.5 billion investment in Flipkart. Real estate recorded $2.3 billion across 13 deals, and financial services announced deals worth $1.4 billion across 25 transactions for the quarter, reports the Times of India.

India is clearly maturing as a private equity market with bigger and complex deals becoming more common. Greater numbers of large deals and buyouts support this thesis and it is clearly visible in the third quarter 2017 investment numbers,” Vivek Soni, partner and leader for PE Advisory, EY said.

Magazine with Investment Report written on itThe quarter also saw record exits for PE players. Exits recorded a year-on-year rise of 128 percent in value terms at $4.7 billion across 65 deals, driven by exits via IPOs, open market, and secondary sale, noted the report.

October 10, 2017   No Comments

India Growing Robustly Says World Bank’s Kim

Predicting a strong global growth this year, World Bank president Jim Yong Kim said India has been growing “pretty robustly”.

Speaking at the Bloomberg Global Business Forum meeting in New York, Kim said, “A country like India is growing, has been growing pretty robustly. We think, Japan is growing. Europe is growing in a much more healthy way. The United States continues to grow. There is a leveling-out in developing countries.” In June, the World Bank predicted a 7.2% growth rate for India this year against 6.8% growth in 2016.

Economy chart

“Dormant capital will earn a higher return, where developing countries will have access to much more capital for the infrastructure needs, even for investing in health and education, investing in resilience to climate change and other factors,” he added.

He said in terms of indebtedness, the bank was watching very carefully the debt-to-GDP ratios of every single country, reports the Hindustan Times.

October 2, 2017   No Comments