Thursday, March 21

Buy India, Sell China


You were asking if its good to sell the xtrata and rio and buy virgin. My answer was ambiguous. What you need to think about is what's the best stock or fund to purchase which will give you the best return over the coming say 1 year. So you have to do some analysis. What's the projected return from virgin media? Versus say an Italian or Indian fund? Or say the ft 100 or 250 fund? Or an oil firm? Etc etc? Did you do a comparison? 



Buy India, Sell China - Forbes

Until recently, India saw itself as an emerging economic powerhouse, the next China so to speak. Those delusions of grandeur led to complacency and the end-result is that GDP growth has slumped to a ten-year low. Most investors are now writing India off as an economic and political basket case. For Asia Confidential,that spells potential opportunity. While India has many problems, they’re unlikely to get much worse from here. At 13x forward earnings, with a cyclically low earnings base, the India market looks reasonable value.

India’s rival, China, has far bigger problems, in my view. Current consensus suggests China’s economy is recovering, its politicians will ensure this continues and stocks are poised to rebound. I think this will prove very wrong. To prevent a steep economic decline in the middle of last year, China’s politicians effectively doubled down on the investment driven, debt fuelled growth strategy which got the country into trouble in the first place. That’s led to spiralling asset bubbles and this week’s news of likely further monetary tightening confirms the government is worried. It should be.

Two weeks ago, I recommended that investors sell Chinese stocks, after suggesting to buy them in October last year (and realising a nice gain). Today, I’ll outline why Indian stocks offer better prospects over the next 2-3 years.

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