The Hindu Business Line : ‘Govt policies can make or break the trend’

Kolkata, Sept. 23 There are lots of reasons why Indian investors should seriously consider owning the choicest international stocks, observes Mr Paritosh V Thakore, V-P, Head of Asian Equities, ABN Amro Asset Management (Asia). “Asia in particular presents a strong case. And in this continent, the two most compelling arguments are India and China, the two largest economies”, he tells Business Line.

Excerpts.

Will it also not make sense to get into funds that feed into truly global products?

It will actually, provided an investor wants to have stocks from all over, including those from all sorts of emerging markets. In fact, some of our peers in India have introduced such concepts. However, for our immediate requirement, India and China together make a very attractive proposition. You know, a significant aspect of the growth recorded by Asian stocks is on account of what has been achieved in China.

What can play the party-pooper? Where can it go wrong?

Well, Government policies can make or break the trend. This is especially true for a country like China. The latter, for all the bold steps it has taken, is driven largely by the strategies adopted by its Government. The Indian scenario – though this is broadly true here as well – seems to be somewhat different, thanks to the many private-sector entrepreneurs who do business in this country.

At another level, inflation can also be a worry for the policymakers. But nobody really doubts the growth potential of the corporate sector in terms of higher earnings. But one keeps on hearing about issues related to capacity creation.

Where are the broad similarities between the two economies?

You have large public sector enterprises in both. In steel and banking, for instance, there are sizeable government holdings in leading companies. That’s a clear similarity. On another front, both countries are witnessing consumption-led development. Further, both have been spending on infrastructure. The scale varies, though, which is evident from the mammoth projects that China has taken up in recent times.

What are the most striking dissimilarities?

India has a definite history to speak of when it comes to the equity market. In China, however, this is of a far more recent origin. Let me also say that the Chinese have seen huge inflows into the country. What they have received by way of foreign investment is far greater than what India has attracted. The scale, as I said earlier, is different.

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