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Indian market better than China
By agencies
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Friday, 11 November 2005, 20:30 IST
MUMBAI: Returns from Indian equities are likely to be negative in the next few months, as valuations look expensive after a three-year rally, but still for the long-term, India remains a favorite destination over China, an emerging markets fund manager said.
"The financial system in China is extremely weak. There is a risk of a crisis like the East Asian one in the 1990s. They are doing all those mistakes which the Korean companies did 10 years ago, said Antoine Agtmael, president and chief investment officer at Emerging Markets Management L.L.C.
In the last three years, India's benchmark BSE index has reached at more than double at $16 billion of foreign fund buying in just 22 months. Many mid-cap stocks have risen even faster, making them expensive.
He said, "We are currently overweight on India, but would remain cautious and would wait for prices to fall before buying more." He manages $14.8 billion in emerging market equities. "I believe in cyclical theory, so I prefer to remain cautious," he added.
The Virginia-based fund, with about 8 percent of its assets in India, holds Reliance Industries Ltd, Infosys Technologies Ltd., Ranbaxy Laboratories Ltd and State Bank of India. Indian corporate governance standards and aspiring entrepreneurs provided a lot of investment opportunities in companies that could become globally competitive, Agtmael said.
In order to grow in size and be international many Indian companies have started making acquisitions abroad. This week, Dr. Reddy's Laboratories Ltd agreed to buy Roche's active pharmaceutical ingredients business in Mexico for $59 million, and software services company Tata Consultancy Services Ltd., bought Chile's Comicrom.
He said, "We don't buy indiscriminately, but figure out which are the ones going to be world class.