Recent, temporary "mini-correction" offers buying opportunity for astute investors.
TORONTO, Dec. 7 /CNW/ - Canada's leading authority on emerging markets investing says that "Right now, we have a rare and ideal opportunity for Canadian investors to add the vast potential of India, one of the world's largest and fastest growing economies, to their portfolios."
According to Bhim D. Asdhir, President and CEO of Excel Funds Management, a mini correction in Indian equity markets in November has essentially given astute investors an opportunity to add or increase their investment allocation to India at temporarily favourable prices.
Asdhir says "The growth expectations for India's economy and equity markets remain extremely strong. The developments that weighed on investor sentiment and were the main factor in this recent mini correction were not systemic issues but rather temporary blips whose impact will likely disappear in the next couple of months. We remain optimistic based on an expected compound annual earnings growth rate of 18 to 20% over the next two to three years."
Julie Makepeace, Excel's Vice President, Marketing and Sales commented that "Calendar year ends traditionally provide an opportunity for investors and their advisors to evaluate their portfolios and make asset re-allocation decisions based on performance, potential and tax planning. The Excel India Fund is strong on all three counts and one of the best decisions investors are making just now is to add India's potential to their portfolios. Where historically investors were looking at holding perhaps 5 - 10% of their portfolios in emerging market equities, we are now seeing many moving to 20 - 25% or higher. This is in addition to the trend from high yield bonds to emerging market bonds which have a lower-risk / higher return profile."
"The risk-adjusted return potential in international markets has changed dramatically over the past few years." points out Gavin Graham, Global Strategist at Excel Funds. "Demonstrating the dramatically improved risk profile of the emerging markets, the standard deviation of the MSCI World index and of the MSCI Emerging Markets index from 2005 to 2010 were both 16.5% (source: Bloomberg). This measure of risk was 13.5% for Canada's S&P TSX. Given that emerging markets are expected to experience a decade of spectacular growth, it is understandable that investors are now allocating a significant portion of their portfolios to this asset class."
Excel India Fund was up 16.9% for the year ended November 30th, 2010, following a 57% gain in 2009. Since inception in 1998, a $10,000 investment in the Excel India Fund would have grown to $51,703 by November 30th, 2010 compared with $34,567 for the Bombay Stock Exchange's benchmark Sensex Index and only $21,572 for the S&P TSX Index.
Excel Investment Counsel's Senior Portfolio Manager Paul Mesburis said "One of the benefits of the actively managed Excel India Fund is its ability to shift its bias incrementally towards the kinds of equities that are projected to both withstand the pressure of the correction and then benefit disproportionately from the return to business as usual in the near term. For this reason, our sub-advisers have moved slightly towards large caps in the current market situation and we expect these initiatives to manage risk and deliver returns to yield dividends in the future."
Global investment observers are forecasting even better than expected growth for India over the near and medium term:
A recent study from Morgan Stanley predicted that India's already strong growth potential of over 8% for the next decade may in fact accelerate to 9.5% between 2011 to 2015, and that for the next 20 to 25 years, India will grow faster than any other large country.
The McKinsey Global Institute (MGI) believes India is on the verge of the second-greatest urban migration the world has ever seen, as its urban population expands to 590 million people by 2030. MGI says India will have 68 cities with populations of more than 1 million, 13 cities with more than four million people and six megacities with populations of 10 million or more. MGI says the Indian economy is expected to be five times greater by 2030, with urban centers being the key driver of this growth. It projects India's labor force to increase by 270 million, with 70% coming from urban jobs. The average age of that labour force will be substantially younger than the world's western and developed economies, but than other emerging countries such as Brazil, China and Russia as well. In addition, MGI estimates that India will have 91 million middle class households by 2030, a 300% plus increase from today.
In order to meet the needs of this urban class, MGI estimates India will need $1.2 trillion in capital investment, which represents about one-third of India's total 2009 GDP, along with 2.5 billion square meters of paved roads, 7,400 kilometers of new subways and transportation, and 700 million to 900 million square meters of commercial and residential space. This means that India would need to build a city the size of Chicago every year for the next 20 years to create enough commercial and residential space.
MGI concluded that demand will make "…this cycle different than anything we've experienced in the past."
In early December, a Bloomberg report also indicated that India's finance ministry said the country's economy is likely to surpass the government's 8.5% growth target for the fiscal year, the largest gains in three years, and that India could achieve a 9% growth rate sooner than expected. Record car sales in October, reported by the Society of Indian Automobile Manufacturers, and expanding bank credit with loans up 22% over a year earlier provide evidence of growing consumer demand in India.
In September 2010 The Economist cited the young labour demographic as one of the factors that will contribute to India's projected growth. The "second advantage is that the economic reforms of the early 1990s have unleashed an explosion of pent-up commercial energy." While "China's growth has been largely state-directed…India's is driven by 45 million entrepreneurs" according to the Federation of Indian Chambers of Commerce and Industry. Finally, The Economist says, "India's democracy may confer long-term benefits…In the long run, that may offer a better guarantee of the stability that businesses crave."
The Excel India Fund has a unique structure that provides investors with 2 distinct advantages: the Fund incurs no withholding tax on capital gains in India and has no foreign investment limitations. This structure is grandfathered and cannot be replicated by another Canadian investment fund. Excel India Fund's sub-adviser, Birla SunLife AMC Ltd., which has managed the fund since its inception in 1998, are award-winning, "on-the-ground" experts resident in Mumbai, India with their fingers on the pulse of both the overall Indian economy and individual investee companies.
Excel Funds Management Inc. specializes in emerging markets. Founded in 1998, the firm now offers 11 mutual funds: Excel India, Excel China, Excel Chindia (unique in Canada), Excel Latin America, Excel Emerging Europe (unique in Canada), Excel BRIC, Excel Emerging Markets, Excel EM High Income, Excel EM Capital Income, Excel Growth & Income and Excel Money Market. Recognizing that a significant portion of performance is the result of consistently getting the asset allocation right, Excel Investment Counsel has built sophisticated, proprietary quantitative models for this purpose. The evidence that it works is in the performance of the Excel BRIC Fund which has a 5.3% premium over its benchmark, the MSCI BRIC index (November 30, 2010). Active investment management is the key to success in Emerging Markets. Excel Funds has retained - on an exclusive basis - major, award-winning sub-advisers who, importantly, are resident in the investee countries. These sub-advisers include Birla Sun Life, one of the largest private sector mutual fund companies in India with over $14BN (US) in assets under management; Baring International Investment Ltd., an affiliate of Baring Asset Management, which has US$46BN in assets, has been managing Pacific market investments since 1975, including the largest China fund in the world, and which is one of the largest asset managers in Eastern Europe; Itaú -Unibanco, the largest bank in the southern hemisphere which has been managing assets since 1957 and currently has US$150BN under management; and Amundi Asset Management (a combination of the asset management affiliates of two large French financial groups: Crédit Agricole and Société Générale), the 3rd largest asset manager in Europe and 8th in the world with CAD$1TR under management and offices in more than 30 countries on 5 continents. Individual Canadian investors can only access the investment expertise of these firms through Excel Funds.
Today at 10am EST, Excel Funds Management and Amundi Asset Management updated Canadian financial advisors on the opportunities for investing in emerging markets in general and the unique advantages of the Excel Funds investment model with a special focus on the 2 new Excel Funds: Excel EM High Income and Excel EM Capital Income Funds which are emerging market bond funds managed by Sergeï Strigo, Head of Emerging Market Debt & Currency at Amundi
For further information: For further information:
Ms. Julie Makepeace, Vice President, Marketing & Sales, 647-309-3532,