To invest in India or China? Which to choose?
Both countries' stock markets show huge potential but there are many issues to weigh up before investing your money
Sunday 13 January 2013
China or India? it's not just the geopolitical question of our age but also a key choice for investors. On the one hand China has grown to such a size that it's probably a misnomer to call it emerging: it has already emerged, set to outstrip the US economy by 2030 on some estimates.
Meanwhile, India, which started its recent growth bonanza after China, is powering ahead, overtaking the UK economy last year in terms of gross domestic product and racing up on Germany.
But where should you be putting your money – India, China or both – and what else apart from the big- picture economic growth story should you be considering?
"There seems to be little correlation between GDP and stock markets. For example, the UK has barely grown in the past year but the FTSE is up by 11 per cent. Meanwhile, in China we have 8 or even 10 per cent annual GDP growth yet over the past three years it has been one of the biggest falling stock markets," said Mark Dampier, a director at IFA firm Hargreaves Lansdown.
One of the key problems with China, says Mr Dampier, is liquidity: "So often it's only the shares in the big companies, the likes of China telecom, which are traded by big international funds while many of the Chinese specific funds, open to investors, look at smaller to medium-sized companies which can be tricky to buy and sell."
And there are major concerns that many companies in China do not adhere to international standards of transparency, meaning investors may not be sure what they are buying.
Recently, the Chinese Academy of International Trade and Economic Co-operation said 823 out of China's 1,689 listed, non-financial companies, have annual reports containing "abnormalities". A real red alert for investors. But nevertheless, as with India last year, a period of stock market underperformance can be a prelude to a strong rebound.
Anthony Bolton, the highly experienced manager of Fidelity China Special Situations, reckons there are positive signs: "China is at a very interesting juncture. We are now one year into a slow easing of policy and are starting to see evidence that activity has stabilised after a period of substantial slowdown. However, this is a market that can turn on a sixpence and I would be very surprised if 2013 isn't a much better year after an A-share bear market that has lasted more than three years."
Darius McDermott, the managing director of Chelsea Financial services, reckons that 2013 could be a lot better for China. "China is cheap. Even if you exclude the Chinese banks (which are really cheap but no one wants to own) the market is still at a substantial discount to its long-term history.
"The leadership handover appears to have happened with a minimum of fuss and they have to concentrate on getting away from a debt-fuelled market to a consumer-driven market. Now is a good entry point for long-term investors in China and very well may be a good investment for the short term," Mr McDermott said. India was undoubtedly one of the better performers of 2012, at least during the first half of the year and Avinash Vazirani, who manages the Jupiter India Fund, says this is because it is less reliant on the vagaries of world trade than China.
"Where China has always been heavily reliant on exports, traditionally, India has been more dependent on its domestic market. In terms of sectors, China has a much more developed industrial manufacturing sector while India has a sophisticated services sector."
In addition, India has far more younger people than China because of the latter country's one-child policy. And in India the benefits of wealth seem to be more widely shared, as noted by Mr Vazirani: "Consumption growth is growing much faster than GDP and we particularly like brands, stocks with high barriers to entry and those displaying high cash generation."
But over the long term with India and China suffering from such marked stock-market volatility, Mr Dampier suggests instead of buying Indian and Chinese specific funds (although he does have time for Jupiter's suite of funds and Fidelity Special Situations) it may be best to go with a south-east Asian fund, leaving it up to the manager when to go over or underweight the regional giants of China and India.
"I like the Aberdeen asia pacific, first state or fidelity south east Asian funds. Let these managers take the strain of judging which market. Generally, I'd advise to start off with a wider regional fund and only then look at country specific," Mr Dampier said.
'These markets can be volatile but I have time to ride out the peaks and troughs'
Daniel Geoghegan, 38, from London and a management consultant has bet big on India and China.
"I reckon that I have around 60 per cent of investments in India and China, mostly through Jupiter funds, which I know is a high proportion." Daniel sees investing in the new superpower economies as a long-term play: "I have been investing for over a decade and what appeals to me is the big picture. These countries have exciting fundamentals in place such as a productive workforce, a burgeoning middle class and growing consumerism – compare this to Europe for instance and the differences are stark." Daniel puts the rest of his cash in big blue-chip company shares in the UK and the US: "I understand that markets such as India and China can be volatile but I reckon at my age I have time to ride out the peaks and troughs." His favourite is India.
- 1 A politically correct lefty goes to see Top Gear live – you'll probably believe what happened next
- 2 Woman accidentally shoots herself in the head while posing for a selfie
- 3 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 4 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
- 5 David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof