Monday, November 29, 1999

UK-listed Indian firms favourite among investors

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London-listed emerging market companies look set to outperform both UK firms and their domestic peers in 2010, with Indian firms the top picks as their earnings are powered by the demands of a booming population.Blighted by the euro zone debt crisis, concerns have grown over UK and European firms' earnings prospects, leading a growing number of investors to seek the shelter of BRIC (Brazilian, Russian, Indian and Chinese) companies in sectors such as infrastructure, energy and real estate.The attraction of London-listed BRIC firms over companies listed on their respective domestic exchanges is that investors buy into the country's growth story while reducing risks associated with direct cross-boarder investments, such as currency risk and unfamiliar regulation.Among outperforming UK-listed emerging market firms are Indian energy producer Greenko Group, China Real Estate Opportunities and Russian miner Petropavlovsk.These shares have risen up to 28 percent this year, bucking a wider trend which has seen a 0.7 percent drop on Europe's FTSEurofirst 300 and in their domestic markets.The BSE Sensex is down 0.3 percent this year, the resource-led Russian MICEX is flat, the Shanghai Composite has fallen 21.6 percent, while Brazil's benchmark Bovespa stock index is down 6 percent.This relative performance is reflected in analysts' stock preferences."World stock markets have decided that, apart from China and India, growth is not going to be there in the manner we might have hoped," David Buik, partner at BGC Partners, said.While analysts see GDP growth in BRIC countries of around 8 percent sustainable in fiscal 2010/11, Europe's anaemic 1.0 percent growth estimate has come under pressure with some in the the region fearing a double-dip recession.BRIC earnings remain attractive too with price/earnings ratios ranging from around 5.9 on Russia's MICEX to 16.1 times on Sensex."Earnings growth has been positive and while valuations are closer to long-term averages, we believe that India's growth potential warrants a valuation premium," Franklin Templeton Asset Management said in a note recently.INDIA ROBUSTIndian firms remain firm favourites with investors, ahead of other BRICs, with their shares giving the highest returns in the past financial year."Indian stocks listed in London are showing a robust performance," Anuj Chande, Head of South Asia Group at Grant Thornton UK LLP said, whose India Watch index has outperformed other indexes, including the FTSE 100, since its inception in 2007.Chande picked out film and TV production firm DQ Entertainment and real estate investment company Unitech Corporate Parks among the top performers.While Chinese, Russian and Brazilian stock valuations have come under pressure from domestic risks, India-focused firms are likely to benefit from the demands of a young and fast-growing population of around 1.2 billion.Teera Chanpongsang, Fidelity's India-focused fund manager, said Indian companies were well shielded from the pains afflicting European peers."The banks have adequate capital and non-performing loans are quite low and so I do not see any long-term impact on India," he said.Indian Finance Minister Pranab Mukherjee pledged on Feb. 26 to trim the fiscal deficit from a 16-year high while boosting funds for roads, bridges and power plants."Even if measures are currently being undertaken to halt near-term growth in markets such as India we expect demand trends to remain robust and endure over the medium term," Edison Investment research said.Edison added it favoured businesses with global diversity, especially those exposed to Indian markets.Business in India remains robust, with activity among Indian service firms expanding for the 13th consecutive month in May.Harry Nimmo, manager of Standard Life's UK smaller companies fund, said his fund has invested in emerging markets, including India, recently as he went in search of steady growth.He picked out infrastructure and oil and gas plays such as power plant developer and operator KSK Power Venture, coal explorer Great Eastern Energy and gas explorer Indus Gas, as India meets growing domestic demand.Car sales in India posted their strongest April in at least a decade, jumping an annual 39.5 percent, showing demand remained robust."The country's structural growth opportunities can continue to drive attractive long-term returns," Fidelity's Chanpongsang said.(For more business news on Reuters India click
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