• 3 minutes Boris Johnson taken decision about 5G Huawei ban by delay (fait accompli method)
  • 6 minutes This Battery Uses Up CO2 to Create Energy
  • 10 minutes Phase One trade deal, for China it is all about technology war
  • 12 minutes Trump has changed into a World Leader
  • 3 hours We're freezing! Isn't it great? The carbon tax must be working!
  • 6 hours Indonesia Stands Up to China. Will Japan Help?
  • 3 hours US (provocations and tech containment) and Chinese ( restraint and long game) strategies in hegemony conflict
  • 10 hours Shale Oil Fiasco
  • 24 hours Might be Time for NG Producers to Find New Career
  • 10 hours Environmentalists demand oil and gas companies *IN THE USA AND CANADA* reduce emissions to address climate change
  • 3 hours Historian Slams Greta. I Don't See Her in Beijing or Delhi.
  • 7 hours Tesla Will ‘Disappear’ Or ‘Lose 80%’ Of Its Value
  • 17 hours Beijing Must Face Reality That Taiwan is Independent
  • 1 day Angela Merkel take notice. Russia cut off Belarus oil supply because they would not do as Russia demanded
  • 21 hours Anti-Macron Protesters Cut Power Lines, Oil Refineries Already Joined Transport Workers as France Anti-Macron Strikes Hit France Hard
  • 1 day China's Economy and Subsequent Energy Demand To Decelerate Sharply Through 2024
Alt Text

What Beijing’s Retaliation Means For Oil

China has fired back against…

Alt Text

Chevron To Buy Anadarko In $33B Deal

Chevron announced that it has…

Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Premium Content

Use the Melt Down to Load Up on India

Take a look at the chart for the emerging market ETF (EEM) below and you will be surprised to see how well it has held up in the recent collapse. This is in sharp contrast to its performance during the 2008 crash, when emerging markets outperformed developed markets to the downside by a factor of two or three.

So I thought it would be useful to spend some time with Sunil Asnani, portfolio manager at Matthews International Capital Management in San Francisco. He argues that you want to buy these markets during periods of market instability. Historically, they take the biggest hits, but then bounce back the hardest. For example, the India market (PIN) roared back 250% after the 2008 melt down, versus only a 104% move for the S&P 500. This is what you would expect for an economy that has grown 6%-7% a year for the past two decades, nearly double the American rate.

Asnani addresses the opportunities in India from a unique perspective in that before obtaining his advanced degrees, he was the Superintendent of the Kerala Police Department. He believes that India’s growth can accelerate from this level. India is first and foremost an infrastructure play. The massive capital investment program that China is now completing is only just getting started in India. Spend six hours a day between meetings in Mumbai traffic jams, and you can understand the need. Another round of reforms and deregulation is poised to unleash India’s incredible entrepreneurial culture. It also is carving out an important niche at the bottom end of the global car market (click here for “Take Tata Motors Out for a Spin”).

India is on the verge of becoming the next China. Runaway wage increases of 20% a year for trained staff are rapidly pricing the middle Kingdom out of labor intensive industries. The bill will also start to come due for China’s 30 year old “one child” policy in about five years, which will create massive demographic headwinds for further growth. India, on the other hand, has one of the world’s most enticing demographic pyramids, and will remain a young country for decades to come. That brings an ever rising tide of customers. At $3,500 per annum, India’s per capita GDP is only half of China’s.

The Mumbai stock exchange has 5,000 listed stocks, but liquidity is poor and short selling is rare. While countless hours spent on the phone with tech support in Bangalore might convince you this is first and foremost a software country, it only accounts for 5% of GDP and 1% of the workforce.

The world’s largest democracy does have its weaknesses. Some 70% of its oil is imported, so any sharp rise in the price of crude has a huge negative impact on the economy. Asnani reckons that each $10 increase in the price of oil chops 30 basis points a year off of GDP growth. Only 2% of the population pays taxes, creating perennial budget deficits. While the country’s higher education is world class, elementary education is backward. Perhaps 50% of the rural population is unable to read or write. Inflation, now officially at 8%, but realistically probably over 12%, is a constant risk.

Many of these price increases are tied to the rising price of food. India has one of the world’s most primitive agricultural sectors. Its productivity here is 1/3 of China’s and 1/5 that of the US, thanks to ancient land holding practices, primitive technology, and a backward distribution system. One third of India’s food production perishes to rot and rats before it reaches the end consumer.

Talking to strategists at the major hedge funds, India is where they are happiest making their 20 year bets. So you might want to take a look at the leading India ETF’s, (PIN), (INDY), and (EPI).

EEM

PIN

INDY

EPI

By. Mad Hedge Fund Trader




Download The Free Oilprice App Today

Back to homepage




Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play