Aberdeen bullish on Trump-proof India

SINGAPORE: India trailing Spain on the sovereign ratings tables makes no sense to Aberdeen Asset Management, which calls the delay in acknowledging the Asian economy's improving outlook staggering.

With India “isolated" and less threatened by possible protectionist measures by US President Donald Trump, Aberdeen is overweight on the country and its local companies, said Hugh Young, the fir m's Singapore-based Asia managing director, who helps oversees assets of $400 billion.

“We are not in wait-and-see mode anymore,“ Young said in an e-mailed response to questions.“Even though it is still relatively early days, the economy has transitioned, we are already seeing significant improvement and the groundwork has been laid for even stronger performance ahead. To not acknowledge that the outlook has improved is staggering.“

Prime Minister Narendra Modi's government has pushed through a slew of reforms from amending archaic bankruptcy rules to allowing more foreign investment and readying a nationwide sales tax. While a recent move to ban some high-value currency notes has slowed the economy , analysts still forecast a 6.8% expansion this fiscal year, among the fastest for major economies.

Aberdeen's $7.7-billion Emerging Market Fund has the highest allocation weighted to India compared with other countries and counted mortgage lender Housing Development Finance and consumer company ITC among its top 10 holdings as of December 30. The equity fund returned 27% to investors in the past year, beating 61% of its peers. “This is a reflection of the quality and value of the underlying companies,“ Young said.“From a fixed-income point of view, we remain particularly bullish on India.“

Trump Exit
Still, foreign investors have been net sellers of Indian shares in nine of the last 11 weeks through January 18 since Trump was elected amid speculation his spending plans will prompt the Federal Reserve to raise interest rates at a faster pace. Higher rates in the US reduce the allure of emerging-market assets.

The selling was intensified by Prime Minister Narendra Modi's decision to invalidate 86% of India's currency in circulation in a clampdown on tax evasion and undeclared wealth. The unexpected demonetisation drive rattled businesses in an economy where 98% of consumer transactions are done in cash.The Modi government has been lobbying global agencies to lift India's sovereign rating from the lowest investment grade, citing the introduction of simpler tax and bankruptcy laws, easing inflation and a pledge to narrow Asia's widest budget deficit.