Weakness in EMs an opportunity to buy not a threat
Hugh Young, MD, Aberdeen Asset Management Asia
Dec 02, 2016 | Source: CNBC TV18
Demonetization is a big reform in a country like India where things usually move slowly. Although the surprise move did lead to a lot of confusion, it shows a strong commitment to reforms. It is definitely an important signal and overseas investors have read it positively. However, one is keen to see more such reforms.
Goods and Services Tax (GST) would be a long-term positive if implemented properly. I’m not too worried about the price corrections seen in emerging markets; in fact I see them as an opportunity to buy and not a threat. However, I would keenly watch Donald Trump's policies to assess the impact on investments in the emerging markets. While fundamentals of most EMs are strong as of now, global economy still remains weak.
I believe though there are reasons to be cautious, one can look at good opportunities by being selective. The basic theme of Aberdeen has been to look at companies where balance sheets are rock solid. Therefore, in India we have stuck to our long-term investments in TCS, HDFC Bank, Kotak Mahindra Bank.
Among other Indian investments, I’m happy with exposure to Grasim and Ultratech and expects plenty of upside for them. In the auto space Aberdeen has exposure to Bosch and Hero MotoCorp. Although Bosch remains an incredibly strong business, valuations are a bit of a concern. Hero has managed do well post their split with Honda. The fund's healthcare exposure is in stocks like Sun Pharma, Lupin, GlaxoSmith, Sanofi India.