Sceptic Aberdeen turns ‘India bull’ as valuations shrink

Mumbai, June 19: Eight months after calling India’s stock rally overdone, Aberdeen Asset Management is finding value in Asia’s thirdworst perfor mer this year. The reason: China.

TheUK’ssecond-largestpubliclytradedmoney manager by market value says the Asian nation’s shares are attractive now after funds pulled money out to chase better returns in China. The Sensex index is now valued at a 33% premium to the MSCI BRIC Index, near the least in almostsixyears.TheShanghaiCompositeIndex has more than doubled in 12 months.

“We’ve been putting money into a few India accounts,” Hugh Young, Singapore-based Asia managing director at Aberdeen, which oversees about$537billion, said. Declining valuations have madehim“lookat India more favorably than before,” he said.

Overseas investors have been dumping Indian shares at the fastest pace in 22 months as the euphoria over Modi’s development agenda fades.

Foreigners have sold a net $651 million of shares in June, on pace for the worst month since August 2013, while overseas funds investing in China added more than $4 billion in the week through May 27, more than double the previous record set in 2008, according to data provider EPFR Global.

Still, the IMF predicts India’s growth will outpace China’s in the fiscal year ending March 31. India’s GDP grew 7.5% in the three months through March, beating China’s 7% expansion.

Analyst estimates compiled by Bloomberg show profits at companies on the Sensex will climb 35% in the next 12 months, versus a 27% gain for the Shanghai Composite,

“India’s growth prospects are still there as much today as they were 12 months ago, but China has done better because of fund flows,” said Young. “If everyone does China, then India becomes amazingly attractive.”

The Aberdeen Emerging Markets fund had 13.5% of its $9.5 billion assets in Indian shares as of April 30, compared with 11.3% in Brazil and 7.3% in Mexico, data compiled by Bloomberg show.

India’s growth prospects are still there as much today as they were 12 months ago, but China has done better because of fund flows. If everyone does China, then India becomes amazingly attractive

HUGH YOUNG, Asia MD, Aberdeen