Strategy
Value To Be Found In Chindonesia – Swiss & Global Asset Management
Despite the short-term turmoil, Chindonesia’s structural growth drivers will continue to drive the economy, with domestic-focused companies continuing to increase earnings at a double digit pace, says Swiss & Global AM.
Vincent Lagger and Jian Shi Cortesi, fund managers of UCITS 3
fund the JB Chindonesia
Fund at Swiss
& Global Asset Management, tell WealthBriefingAsia
why Chindonesia is this years' buzz-word.
Chindonesia
(China, India and Indonesia) is home to 40
per cent of the world’s population, around 2.8 billion people,
and will add at
least 170 million people to its workforce over the next ten
years. Despite robust domestic growth and financial
discipline,
the Chindonesian equity markets could not escape the sell-off
triggered by the
never-ending eurozone sovereign crisis. Investors are ignoring
the strong long
term fundamentals and are adopting a short-termist approach.
The recent correction saw valuations drop to levels seen
during
the troughs of the financial crisis, however, this has provided
investors with
an attractive entry point to the Chindonesia growth story. The
MSCI China’s
price-to-book ratio of 1.4x sits below the 2008-2009 lows of
1.6x, and even
remains cheap when the troubled banking sector is removed from
the equation.
Indian equities are trading at levels witnessed in 2004 which
is
low, especially after factoring-in a potential loosening of
monetary conditions
and easing commodity prices.
Despite
the short-term turmoil, Chindonesia’s structural growth drivers
will continue
to drive the economy, with domestic-focused companies continuing
to increase
earnings at a double digit pace. The long-term growth story
remains intact.
Infrastructure investments are still booming while the prospects
of the huge
middle-class keep improving thanks to labour reforms and rising
farmers’
income.
The
resulting consumption boom is visible in many industries as goods
become more
affordable. Additionally, should the private sector require
stimulus,
Chindonesian policymakers can still rely on healthy public
finances to help
compensate for falling western demand.
