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  • 07/05/2016

Vazirani of Jupiter sees Modi’s work driving unprecedented opportunities


Benefiting From India’s Transformation

By Matthew Fletcher

When it comes to picking stocks, it’s all about attention to detail – something at which Jupiter Asset Management excels. So it’s no surprise that Jupiter’s India Select SICAV fund, managed by Avinash Vazirani, has consistently outpaced its benchmark since it was launched in mid-2008. In recognition of this focus on excellence, the Fund has been awarded the title of Best-in-Class – India Equity in BENCHMARK Fund of the Year Awards 2016.

Tapping into India’s Domestic Growth Potential

Vazirani adopts an unconstrained, bottom-up approach to stock selection, looking for companies with price-earnings and price-to-book ratios that are less than the market average, but where historical and forward earnings-per-share growth are above it. Typically, he prefers to have met the management over a period of time before investing. “We’re looking for good businesses run by strong teams that have the interests of shareholders at heart,” he explained.

Vazirani says that liquidity is not one of his main investment criteria when selecting companies for the Fund. “We want the businesses we invest in to have sustainable incomes and cashflow. If you go through our portfolio, you’ll find they generally have strong brands and intellectual property, higher barriers to entry and are more domestically focused. Essentially, we’re aiming to benefit from domestic Indian growth.”

As a result of these parameters, the Fund tends to be overweight in consumer companies and financials and underweight in commodities compared with its benchmark, the MSCI India index.

Benefiting from Modi’s Anti-Corruption Drive

In Vazirani’s view, the long-term prospects for India continues to look very bright. There are five main factors that he thinks will drive long term profitability of Indian companies and which he believes are still under-appreciated by the market: political stability, introduction of direct benefit transfers (DBT), implementation of a country-wide goods and services tax (GST), increasing access to high-speed internet and a shift from physical to financial savings.

The big news for the Indian economy was the decision of Prime Minister Narendra Modi last November to remove high-denomination notes from circulation, or ‘demonetize’ them. This surprise announcement was chiefly aimed at curbing terrorism and tackling unaccounted-for corrupt money. Since the notes that were deemed to be no longer legal tender, principally 500-rupee and 1,000-rupee notes, represented 86% of the cash in circulation, or about $220 billion, this had an immediate impact on both the ‘black’ and official economies.

Several sectors of the economy that were reliant on cash payments have been hit. For example, in November and into early December, the operations of trucking and haulier groups and other logistics companies came to a standstill, impacting corporate sales across the board, Vazirani explains. On the plus side, Indians reacted with ingenuity to the change, he says, with shop keepers erecting QR codes outsides their premises in order to facilitate the collection of payments electronically. Indeed, Vazirani believes that demonetization, as well as boosting tax revenues by bringing money back into the official economy, will also help the transition to a more digital economy as more Indians do their banking online.

In the short term, the anecdotal evidence is that the wider economy has been negatively impacted by demonetization. For 2017, the IMF has cut its growth projection for the country by 1 percentage point to 6.6%, citing its impact. But there is considerable uncertainty about how it will feed through to companies’ bottom lines in the near term. “We can see six to twelve months down the line. The uncertainty is in the next three to six months,” says Vazirani.

For him, demonetization is strongly positive for both the economy and the stock market. “The reduction in corruption and greater tax compliance will bring benefits long term. That’s what’s being missed by commentators,” he says. Companies that operate in India’s unorganized sector, and that were key players in the cash economy, will now be brought into the organized sector and be required to pay their taxes. The result will be a level playing field to the benefit of listed companies that are more efficient, better run and meet their tax obligations. Most of the companies he invests in are confident that they will gain market share from the unorganized sector.

It’s too early to assess the long-term winners and losers from demonetization, says Vazirani. But two clear beneficiaries are financial services and financial technology companies as Indians take their money out of gold and property, impacting construction firms, and put it into financial products such as insurance, online savings accounts and mutual funds.  Vazirani also predicts lower interest rates and borrowing costs for companies as more money is channelled through the official financial system. This should benefit public sector banks, in which the Fund has several holdings, as corporate customers get better at meeting their loan repayment obligations.

On the Cusp of Transformational Change

India was one of the better performing emerging markets in 2016, though the stock market did not fare as well. However, that hasn’t stopped the Fund’s outperformance. 2017 brings a number of uncertainties from outside India. Donald Trump’s election as US president could usher in a new era of more fractious trade relations, starting with his decision to withdraw the US from the Trans-Pacific Partnership free trade agreement. The prospect of higher US interest rates could also negatively impact foreign investor appetite for Indian equities.

Vazirani points out that India does not have a free trade agreement with the US and so is less exposed to Trump’s policy changes on that front. And he says that, despite concerns that the growing protectionist sentiment in the US may affect demand for Indian information technology services, there remains a huge shortage within the US for Indian software engineers and IT services. “Trump is a billionaire businessman and we should trust the decision of the American people and wait and see,” says Vazirani. A hike in US interest rates has resulted in greater selling by foreign equity investors in recent months, he says, but this has been offset in part by an increase in domestic inflows into Indian mutual funds.

More important for India and its markets in the long term is Modi’s success in introducing both demonetization and a new goods-and-services tax, which will finally come into effect in the summer after being under discussion for decades. The tax will significantly simplify India’s convoluted tax system and improve the ease of doing business. For Vazirani, they represent some of the biggest constitutional advances since Indian independence. “Modi has achieved a great deal already. He has done so much. You mustn’t underestimate what has been achieved. India is on the cusp of transformational change,” he says. “I have never been so convinced about companies’ ability to make money, and therefore investment opportunities, in all the years I’ve been investing in India.” BM

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從印度轉型中獲利

Matthew Fletcher 撰文

說到選股,一切皆關乎對細節的認真探究,這正正是木星資產管理的優勝之處。因此,由文智華(Avinash Vazirani)管理的木星印度精選SICAV基金,自2008年中推出起表現一直跑贏基準指數。 為表彰此方面的卓著表現,基金已獲評為《指標》2016年度基金大獎印度股票「同級最佳」基金。

把握印度的國內增長潛力

選股時,文智華採用由下而上分析法,物色市盈率與市賬率低於市場均值、但往績與預測每股盈利增長高於市場均值的公司;換言之,就是以合理價格買入他看好的公司。他通常先和管理層見面,了解一段時間後才放心投資。「我們追求由人才雄厚的團隊經營,並將股東利益放在心中的好公司。」

文智華指流動性並非他選股的主要投資準則。「我們投資的企業必需擁有可持續收入和現金流。假如您細看我們的投資組合,您會發現各公司一般均擁有強勁的品牌和知識產權,而且入行門檻較高,亦側重於內需消費。基本上,我們瞄準從印度國內增長中獲利的機會。」

基於上述選股原則,對比其指標指數MSCI印度指數,該基金持有較多的消費股及金融股,而商品股的持股量相對較少。

受惠於莫迪的反貪腐運動

他提出五個將帶動印度公司的長遠盈利能力,但目前仍被市場低估的因素,包括:政治穩定性、引入「福利直接轉帳」(DBT)計劃、在全國實施商品及服務稅(GST)、增加高速互聯網的覆蓋率,以及把人民的實體儲蓄轉化成金融儲蓄。去年十一月,總理納倫德拉・莫迪(Narendra Modi)決定廢除大面額現鈔的流通,或稱「廢鈔」,是對印度經濟有重大影響的事件。此項令人震驚的公佈,主要為了遏制恐怖主義發展,杜絕不明來歷的黑錢。由於被剔出法定貨幣的鈔票,包括主要為500 盧比及 1,000 盧比鈔票,佔總流通現鈔量的86%,或約2,200 億元,此舉對「黑市」經濟及官方經濟均構成直接衝擊。

印度經濟中多個依賴現鈔支付的行業均深受打撃。文智華解釋,例如在十一月及十二月初,貨車與陸路運輸公司及其他物流公司的業務忽然剎停,令企業銷售受到全盤影響。但從好的方面來看,印度人機智應變,很多店主於店外設置QR碼,轉用電子形式收款。文智華相信,隨著廢鈔,及越來越多印度人把資金存入銀行並在官方經濟中流轉,增加政府稅收,會有助印度轉型為更數碼化的經濟體。

據不完全統計,廢鈔已在短期內對廣泛經濟造成消極影響。就2017年而言,國際貨幣基金組織(IMF)鑑於廢鈔的影響,已將印度經濟增長預測調低1個百分點至6.6%。然而,廢鈔會如何在短期內逐漸影響到各公司的利潤,仍存在很大的不確定性。文智華指:「我們通常會預視未來六至十二個月的前景,而不明朗因素將於未來三至六個月內浮現。」

對文智華來說,廢鈔對經濟及股票市場極之有利。他指出:「貪污減少、更多人遵從稅法將會帶來長遠裨益,這正正是市場評論員所忽略的。」於印度非正規經濟內營運的公司,是現鈔支付經濟的主要參與者,如今他們將被帶返正規經濟領域內,且須繳立稅款。這將創造公平競爭環境,使這些公司與更有效、更妥善地營運並一直履行課稅責任的上市公司進行競爭,從而令上市公司受益。文智華投資的公司當中,大部份均有信心會從非正規經濟領域內的公司手上,取回更多市場佔有率。

文智華又指,目前斷定廢鈔的長遠贏家與輸家言之尚早。然而,金融服務公司與金融科技公司是兩個很明顯的受益行業,原因是印度人取回投放於黃金及物業的資金,再把資金投放於金融產品,如保險、網上儲蓄戶口和互惠基金,而建築公司會受到負面影響。文智華亦預測,隨著更多資金透過官方金融體系往來,市場利率將降低,公司可享受較低的借貸成本。由於商業客戶償還銀行貸款的能力增加,公營銀行,包括此基金持有的幾隻銀行股,應可從中受惠。

「處於變革期的開端」

印度是2016年表現較佳的新興市場之一,雖然股市不算太好,未有礙此基金跑贏大市。2017年的外圍環境正為印度帶來種種不明朗因素。自唐納・特朗普(Donald Trump)當選美國總統,並決定美國退出《跨太平洋夥伴關係自由貿易協定》起,可能已拉開貿易關係不穩的新時代序幕。美國息率上升的預期,可能有損海外投資者對印度證券的投資意欲。

文智華指出,印度與美國並無訂立自由貿易協定,因此,受特朗普政策影響較微。儘管市場憂慮美國保護主義情緒加劇,可能減少美國人對印度資訊科技服務的需求,美國國內對印度軟件工程師及資訊科技服務仍是求過於供。文智華指:「特朗普是擁有億萬家財的商家,我們應相信美國人的決定,繼續等待及觀望。」他又說,美元息率攀升,已造成海外股票投資者近月更猛力拋售印度股票,但國內流向印度互惠基金的資金增加,抵銷了部份不利影響。

對印度及長遠股市前景更重要的是,莫迪能夠成功推行廢止大面額現鈔,並令已討論了數十年的商品及服務稅,最終能於今年夏季推行。有關稅項將大大簡化印度繁複的稅制,同時令營商更加便利。對於文智華而言,這些是印度自獨立以來最大的制度改進。他說:「莫迪已取得很大的成功,他所作出的改變是如此驚人,你不能低估已推措施的成效。印度現正處於變革期的開端。」他續說:「投資印度多年,我從未如此深信各公司的未來賺錢能力和投資契機。」 BM

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