CLSA has kicked off its 13th Investor Forum in Hong Kong. The five-day event has attracted over 1200 global investors and some very notable speakers are slated to speak at this event.
Speaking about the event, Rob Morrison, CEO of CLSA, says that investors at the forum are still positive on India. He adds that India has been outperforming its other Asian peers.
He says that India is one of the better growth stories in Asia, and we will continue to see more US clients invest in India.
Excerpts from CNBC-TV18's exclusive interview with Rob Morrisson:
What is the mood towards India at this point and how are most investors approaching emerging markets like ours?
The mood is generally positive. India is one of the better performers in Asia here to date. I think the Sensex is up something like 30% from its June lows.
We have 1100 investors from global institutions around the world, and I think there are 20 Indian companies here, and the view is generally positive. The growth story looks very positive and from that point of view probably India is one of the better growth stories in Asia.
This is the most looked forward investor's conference in the world. So is there any consensus you are getting from participants there that perhaps we have come to the end of a bull run in commodities?
Certainly, there is some consensus in terms of pullback in commodities and I guess that is also a reflection of the fact that there is now more of a view that US economic growth is going to slow down in the second part of the year.
Clearly, the Fed is now signalling that they probably won't need to raise rates further, or if they do, probably it will be only one more further tightening. Clearly US economy slowing has some impact on global demand.
On the other side, there are some signs that China itself is starting to slow down. China of course has the biggest impact in terms of variable pricing on global commodities. So I think in general, people are expecting some sort of pullback in commodities overall.
But I think that is more of a tactical issue rather than long term strategy. We are advising people that from a tactical point of view it might be better to keep their bids slightly closer to home. But on a long-term strategic point of view we continue to advise people to increase their bids on Asia.
As you look forward what is CLSA's call on India as a market, do you expect it to continue this bout of out-performance and from that investor forum do you see new investors or existing investors willing to commit fresh cash to a market like ours?
India is one of our big picks, we like India overall. I think the topline earnings growth from Indian companies is very good. Some of the valuations have probably again pushed out to be a little bit pricy.
India along with China, are two of our favourite long-term plays, and we are starting to see that from an investors' point of view. We have about 20 Indian companies here, and we see tremendous amount of interest from investors in terms of attending presentation. I think people do see that India and China are
Aside from the long-term outlook, in the medium term, would you say that for an emerging market like ours, we have probably seen our best times?
Medium term, I think the valuations have probably pushed through levels, where people are going to be pausing. They are probably going to wonder at what stage should they put in more cash.
But there is still a lot of positives there. Some of the agricultural output numbers have come through, and there is still a lot of demand side push. From a more defensive point of view, is that the Indian economy is more dependent on domestic factors rather than on the US.
There are a number of markets in Asia, which are very dependent, from a GDP stand point on US trade, whereas India clearly is less dependent. If you are concerned about the slowdown in terms of demand out of the US, India is not a bad place to be.
You say that if interest rates in the US go up it's not so much of A concern for India, but how does that effect flows into India and other emerging markets?
That's a good point. There has been tightening happening all over, even in Japan and now there are some signs of tightening from the People's Bank of China, PBoC, in China. Obviously if we move into a sort of higher interest rate environment, you are going to have an impact on liquidity flows. So you have to assume that we will see some slowdown in terms of turnover.
But on the flip side, a number of global investors are looking to increase their asset allocation into emerging markets. This is not just in Asia, but also in Latin America. Emerging Europe also has been a big beneficiary, particularly on the back of commodity plays.
Some people have been saying that in the last three years India has emerged as an asset class on its own. Would you agree that its an asset class on its own or is it just part of an emerging market?
It is, probably some of it is. There are a number of investors who will look to invest in Pan Asia where Japan and India will be part of that mix. There will be a number of people who will invest in India as part of the total Asian exposure.
But then there clearly is a number of funds looking simply at India. Then the upside for India is that there are a number of specialist funds in India, and that number continues to grow.
Based on the sort of investor interest you have seen, are there new markets which are now interested in India? We have had a lot of money coming in from the Far East and of course money coming in from the US as well, but are new markets now getting interested in us?
I think quite a bit of money, particularly retail money, has been coming out of Japan, and that had been a significant investment into India. In a global sense, the US remains a key investor base. We tend to see more of a US client base than a European client base.
So we are seeing more money come out of the Far East, and India is going to be a beneficiary of that.
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