Japanese warm to equities in India

By agencies   |   Tuesday, 21 June 2005, 07:00 Hrs
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MUMBAI: Japanese individual investors are turning their attention to India, where stock market indexes have outperformed benchmarks in China for four years.

"India is the next big thing after China," said Takuo Uchida, president of Eyebright Consulting Service in Tokyo. "India's information technology is starting to flourish." Uchida pays $400 a month into a fund run by Friends Provident, Britain's fourth-biggest money manager.

Five funds focusing on Indian stocks have opened in Japan since September, targeting Japan's 34 million individual investors who buy and sell a combined $1.2 trillion of stocks a year. India's 30-member Sensitive index has risen 46 percent in the past year as economic growth bolsters earnings at companies including ICICI Bank and Infosys Technologies.

"It's likely that India funds will continue to increase in popularity," said Geoffrey Wong at UBS Global Asset Management in Singapore, who oversees the New Major Economies Fund, sold to Japanese clients. "We find Indian equities to be more attractive than China's equities at this time."

The Shanghai Composite, which accounts for 68 percent of China's equities by value, has lost 45 percent since the start of 2001 and is near an eight-year low, hindered by concern that the government will flood the market with part of about $250 billion of state-owned shares. The Hong Kong-based Hang Seng China Enterprises index has risen 20 percent in the past year.

Investors in Japan, where interest rates have remained close to zero since March 2001, are seeking higher returns in emerging markets for some of their $13 trillion of savings.

Of the five India-focused funds that have started in Japan, four are so-called open-end funds that allow individuals to invest after the fund starts, with no deadline. The four open-end Indian stock funds sold in Japan since September have garnered a net ¥67 billion, or $613 million, through April, according to figures compiled by Daiwa Institute of Research.

Mutual funds investing in Chinese stocks, including those in Hong Kong, had net withdrawals of ¥97.6 billion in April through September 2004, according to Daiwa. From October through March, ¥87.6 billion has been taken out of China funds.

PCA Asset Management started the India Stock Open Fund in September. It has grown to ¥37 billion as of June 15, from ¥1.97 billion at inception. Prudential Asia had invested $1.2 billion in Indian stocks as of December 2004.

Deutsche Asset Management, HSBC Asset Management Japan, UFJ Partners Asset Management and J.P. Morgan Fleming Asset have also introduced Indian stock funds.

They will be joined by Nomura Asset Management, Japan's biggest fund manager, which began raising money on June 13 for an Indian stock fund that will start on June 22.

"India seems to have bigger potential," said Tomohiro Motoda, who runs an Indian stock investment circle in Japan called "O - Zero" and plans to raise his six-month-old investment in HSBC Asset's India stock fund. "It's going to be a good investment."

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