My investments in China and India are up over 30% this year

Prabhat Sakya — Wed, 24 Aug 2016 06:35:05 +0000

I’ve always been a strong believer in investing in emerging markets. We’ve seen incredible growth in both China and India in recent years, but I think that the best is still to come.

Yet many have been sceptical about the future prospects of these emerging nations. There’s been much talk of a slowdown in China, and political in-fighting in India. But if we dig a little deeper, we find that the fundamentals are remarkably resilient: Chinese GDP has still been growing at 6.7% per annum, while India has been growing at 7.9%.

China and India: industrial powerhouses

The broad picture is that these countries are now industrial powerhouses, and they’re set to boom relative to more developed markets for decades to come.

Profitability at a range of companies in these countries has been surging. Take China Pacific Insurance. Net profits were CNY9.2bn in 2013, and this jumped to CNY17.7bn in 2015. Revenue increased from CNY193bn in 2013 to CNY246bn in 2015. These are startlingly strong numbers.

Or take India’s Infosys. Net profits were INR104bn in 2013, and this rose to INR136bn in 2015, while turnover climbed from INR493bn in 2013 to INR630bn in 2015.

Rank after rank of businesses has seen rapid growth in both revenues and earnings.

I’ve chosen to invest in these countries with two investment trusts: Fidelity China Special Situations (LSE:FCSS) and JP Morgan Indian Investment Trust (LSE:JII). How well have these done?

On 1 January 2016 FCSS was priced at 121p per share. It has now risen to 170p. That’s an increase of 40%. On 1 January JII stood at 477p. It has now risen to 641p. That’s an increase of 34%.

Why have the shares risen so much? Well, part of this is currency fluctuations. Since January the pound has fallen by about 10% against the yuan, largely because of the Brexit vote on 23 June.

And this is a great time to invest

Also, stock indices such as the Hang Seng and the Sensex have been on the up. Plus, these are well-managed funds that have produced better returns than the overall markets in these countries. What’s more, a substantial amount of gearing for Fidelity China has added to the growth.

Yet the amazing thing is, in terms of equities, we’re still really only at the end of a 17-year bear market, and the next bull market hasn’t even got underway. That means there are likely to be many more stock price rises to come. Thus, if you haven’t bought in yet, this may be a great time to get on board.

And what makes investment trusts like these even more attractive than standard funds is that they currently trade at sizeable discounts. The current discount on Fidelity China is 14.8%. While JP Morgan India is 10.2% cheaper than its net asset value.

That’s why I’ve invested a large part of my portfolio in these funds, and I think you should too. People are often afraid of the growing power of these emerging nations. But if you’re an investor considering buying into China and India, I would encourage you to make the leap.

The post My investments in China and India are up over 30% this year appeared first on The Twelfth Magpie.

More reading

Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

I’ve Been Waiting 16 Years To Write This Article

Prabhat Sakya — Mon, 04 Jan 2016 16:30:35 +0000

So, we’re finally here. It’s been 16 years since the last great stock bull market.

1999 was characterised by a euphoric boom in shares. The end of the second millennium was, more than just symbolically, a farewell to a past full of war, anger and disappointment. We were welcoming the future. But perhaps, with hindsight, it was too naive a future.

Investing in shares has been tough

The ‘clever’ ones haven’t touched stocks since the turn of the century. Anything else was better. Think property, bonds, even building society savings accounts that yield next-to-nothing. The idea was – whatever you do, don’t go anywhere near equities.

Why? Because this was the bear market, and for anyone other than perhaps Neil Woodford and Warren Buffett, bear markets destroy value. The hot stock that you’re sure will make a mint gets caught up in scandal and comes crashing down. The worthy, reliable blue chip you’ve bet the house on is suddenly swamped by competition and its profits crumble. In bear markets, there’s nowhere to hide. At times, it can be brutal.

Now in 2016 when we look to the future we’re a little more cautious and a little more chastened. We’ve had 9/11. We’ve had the Tech Crunch and the Credit Crunch. We’ve had the Eurozone crisis and the collapse of Greece.

Hope seems to have had a battering and we spend much of our time looking over our shoulders, fearful of what will come next.

It will start to get easier

But let me tell you this… there’s never been more hope in the world.

Falling commodity prices and rocketing global production mean that high quality goods and services have never been more plentiful. Rampant inflation is now consigned to the past in many markets and could soon be forgotten.

A surge in emerging markets could ultimately lift not just millions, but billions, out of poverty.

And the growing middle classes in countries such as Mexico and Indonesia are key too. They seem to be embarking on a consumer boom that could to my mind benefit businesses such as Reckitt Benckiser, Diageo, GlaxoSmithKline and ARM.

Stock markets around the world, perhaps with the exception of the US, have been in the doldrums. I would expect them to trend upwards now. China and India will lead the charge, as investors realise that these are the new engines of growth in the global economy. But the UK and Europe will be pulled along with them. So if you haven’t already, you should be buying into shares now, particularly emerging markets and funds such as JP Morgan Indian Investment Fund and Jupiter China.

A lot of people won’t dare to do this, frightened by the wealth destruction of the past decade and a half. If you’ve summoned up the courage to buy into shares, it’s been a long road to get here, but your luck might just be starting to turn.

The post I’ve Been Waiting 16 Years To Write This Article appeared first on The Twelfth Magpie.