Jack Lin, Head of Asia Pacific, Middle East and Africa, Pioneer Investment, talks to Money Today's Shoaib Zaman on various facets of investing in India.
FOREIGN INVESTORS SEEM TO BE BULLISH ON INDIA. WHAT ARE THE REASONS?
I have been coming to India for the last 25 years, but can't remember having seen such optimism over all and that's the key reason. The new government seems to be quite focused on implementing reforms to unleash the potential.
The conundrum for foreign observers in the past has always been that you have a country that has such talented people and potential, but why are we not realising it? Perhaps that's what the Modi government is addressing. We can see some of that potential unleash and that is why a lot of fund investors are so bullish on India recently.
HAVE YOU RECENTLY INCREASED YOUR EXPOSURE TO INDIA?
It's constantly changing and the portfolio view is very dynamic. From a regional perspective, we are overweight on India.
WHAT RISKS DO YOU THINK INDIA FACES IN 2015?
The chief risk in India I believe would be whether we can maintain the current path of reform and the momentum and whether different interest groups will start to derail some of the discussions and policies. So far, Prime Minister Modi is doing a great job, but these are early stages. We will need to see how this unfolds.
ARE THERE INTERNATIONAL RISKS AS WELL?
No. Narendra Modi has done a great job in managing the geo-political position of India. He has very smartly positioned India in between the ongoing conflict between Japan, the US and China.
DO YOU SEE A REVIVAL IN CHINA AND EUROPE?
Well, Europe is still going through a period of structuring. There are some fundamental issues that many European economies are facing. Our view on Europe is cautiously optimistic. It will recover from its current financial and economic problems.
As far as China is concerned, it has experienced tremendous growth over the last few decades. China is also now facing some structural challenges: it's been more of an investment-led growth in the past. That is no longer going to work. So, I think they are trying to shift more towards a demand-driven growth and achieve balance. In the past, it was growth at all cost so now we are seeing environmental and other impacts. There is social impact because income disparity is increasing. I think it is incumbent on the Chinese authorities to figure out a different growth path that will be more appropriate for the stature that they are going into.
PEOPLE BELIEVE THAT THE US ECONOMY IS OUT OF THE WOODS. DO YOU AGREE?
The American economy is actually doing reasonably well, considering what is happening around the world. When we compare them with Europe, China, or Japan, we see that the US has taken the most aggressive stance to get to the bottom of the crisis (the global financial slowdown in starting 2008). We see all areas, whether its unemployment, corporate profits or any other metric, and the US economy is in a reasonably in good position.
IN 2015, WHICH COUNTRY DO YOU THINK WILL HAVE THE BEST OUTLOOK?
It's hard to make that prediction at this point because there are so many volatilities in the world today. We are a bottom-up investor and we are constantly looking at the best opportunities. India is also one of the countries that we are looking at this point.
DO YOU CONSIDER YOURSELF TO BE A VALUE INVESTOR OR A MOMENTUM INVESTOR?
We are very much a value investor. We need to be mindful of the market movement because we are part of the market. It's like the ocean tide. It can carry you away if you are not careful but we are very much sticking to our fundamental value-based investment process.
WITHIN VALUE INVESTMENT THERE ARE MANY DIFFERENT SHADES LIKE BANJAMIN GRAHAM AND WARREN BUFFETT. HOW DO YOU DEFINE YOUR VALUE INVESTMENT PHILOSOPHY?
We are very much a growth-at-a-reasonable-value type of investor. So we will take growth into account. By a certain analysis, a certain PE for a company may look expensive, but if our analysts tell us that the growth over the next few quarters will be higher, then perhaps that PE number as a snapshot may not represent the full value of the company. I think that would explain our philosophy towards value investing.
FROM THAT PERSPECTIVE WHAT IS YOUR VIEW ON INDIA? DO YOU THINK IT IS FAIRLY VALUED OR EXPENSIVE?
We don't think it is cheap but we also don't think it is extremely expensive either. So we do a bottom-up analysis of companies. We identify opportunities based on our growth assumption which we think offers reasonable value.