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Saturday, Nov 07, 2009
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Sagar Bhadra Mumbai, Nov. 6 What is the difference between a US and an Indian retail investor? Ironically, it is the lack of interest in the Indian capital market on the part of the latter. While retail investors in India still seem to have an aversion to the stock market, the American investor’s interest in the India growth story is persuading US fund managers to launch new India-focused Exchanged Traded Funds (ETFs). Traded on NYSECurrently only five India-exclusive exchange traded products with total assets under management of Rs 9,400 crore are available to the US investors, all of which are traded on the NYSE. Of them, three have been top performers (year-to-date) amongst the 15 existing Asia-Pacific ETFs. Recently, Van Eck Global, a US money manager, filed papers with the US markets regulator SEC to launch an ETF offering investors access to Indian small-cap companies. The ‘India Small-Cap ETF’ will be listed on the NYSE and will hold a portfolio of Indian companies with an average market capitalisation of Rs 2,350 crore, according to SEC (Securities and Exchange Commission) filings by Van Eck. “As the attractiveness for investing in emerging markets gains greater awareness amongst investors, we will see more emerging market ETFs launching and those already in the market gaining significant assets,” said Ms Lisa Dallmer, Head of Global Indexes and Exchange Traded Products, NYSE Euronext. “Like institutional investors, the US retail investors are attracted to emerging market economies because these economies are outgrowing the US economy”, said Mr Marc Iyeki, Managing Director- International, NYSE Euronext:
“Since retail investors lack the sophistication and resources of financial institutions, they prefer to invest in emerging countries through US-listed products like ETFs and ADRs.” “Superior returns on equity and the sustained growth in the Indian economy make Indian markets look attractive to US retail investors”, said Mr Sirshendu Basu, Head-Retail Equity Strategy, Standard Chartered, STCI Capital Markets. The interest in India-based ETFs is not new, but is becoming more relevant with every passing day. Investment professionals in India are divided on how the higher foreign investment inflows due to the US retail interest would affect the Indian market. “In case of a global sell-off, Indian ETFs might also face heavy redemption pressure, thereby impacting the Indian equity markets”, said Mr Basu. However, Mr Nipun Mehta, Executive Director and Head of India, SG Private Banking believes that “Indian equity markets are deep enough to stave off a bubble”. There are at least five more India-specific ETFs registered with the SEC but which have not yet been launched. “The US sub-prime crisis could have severely delayed fund houses from launching the planned ETFs,” said an India-based ETF specialist. Also, ETF clearances could take over a year, he added. Global funds: Only some deliver International funds seem to be insulated better More Stories on : Stock Markets | Mutual Funds | Overseas Investments
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