Selasa, 12 Juni 2012

India's powerhouse economy grinds to a halt as UK investors count the cost of backing Asian funds

India's powerhouse economy grinds to a halt as UK investors count the cost of backing Asian funds

By Andrew Oxlade

PUBLISHED: 12:03 EST, 12 June 2012 | UPDATED: 12:30 EST, 12 June 2012


India today revealed its economy had slowed to a virtual standstill as the ill-effects of the eurozone debt crisis continue to ripple out around the world.

India's economic output rose just 0.1 percent in April - far lower than the expected 1.7 per cent increase.

The economy was expanding closer to 10 per cent a year before the global financial crisis. It means that annual GDP growth so far this year is the weakest in nine years.

World stock markets have tumbled sharply in recent months

World stock markets have tumbled sharply in recent months

The slowdown in the country's economic fortunes dramatically increases the chances of a rate cut at the Reserve Bank of India's next monetary policy meeting on Monday.

India's key repo rate is expected to be cut by 0.25 per cent to 7.75 per cent following a 0.50 per cent cut in April. However, high inflation remains a concern.

Ratings agency Standard Poor's said yesterday that India could be the first member of the high-growth BRIC countries - Brazil, Russia, India and China - to lose its investment-grade credit status.

While having worrying implications for the global economy, the slowdown in economic powerhouses of Asia - China cut its key interest rate last week - will also concern small investors in the UK, where many have piled into funds that back Asian stock markets.

Britons have nearly £25billion invested in Far East funds, according to the Investment Management Association, nearly matching the total for the amount invested in European funds.

Another £1.75billion is invested in unit trusts and Oeic funds focused only on China. And those figures do not cover investment trusts.

The poor performing Fidelity China Special Situations investment trust, run by former star UK stock-picker Anthony Bolton, holds nearly £500million of UK investors’ money. It has slumped more than 25 per cent since its launch nearly two years ago.

The JPMorgan Indian Investment Trust has also attracted interest, currently worth £373million. But it has lost 20 per cent in the past two years.

The Jupiter India fund, an Oeic launched in 2008, is the giant. It is worth £2.3billion and has lost 24 per cent in the past year - in line with the fall in the MSCI India index.

The trend for Britons to pump up their portfolios with emerging markets funds has been underway for much of their last decade.

India funds were attractive because of the possibility that the country's wealth, over the very long-term, may catch up with that of the West. 

It has 1.2 billion people and a very young population, regarded as a key ingredient for fast economic growth. It already has a fast-growing affluent middle class of 160million that is expected to grow to 267million within five years.

However, it is near-term headwinds holding back the Mumbai stock market. A recent political impasse amid a failure to deregulate Indian markets and open up the economy's true potential have caused concern.

Meanwhile the eurozone crisis has curtailed demand for Indian services and goods.

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The UK and US have been banking on India to come to the rescue in a number of ways. This has entailed giving India a most favored nation status which has helped it grow into the power house it is. The growth has not been due to India's own merits but numerous favorable policies. Unfortunately the reasons for the support have been in the hope of support against China and as I have stated before this is a servere miscalculation. If you have ever been to China and India there is a glaring difference in terms of infrastucture, population, processes etc. India was a mistake and the benefit has been entirely one way unless you count taking curry as ones national dish a benefit...

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Why does number witheld cost so much now at plus £3 a month or £35 ayear you would think the phone companies are in league with the call centres to prevent call blocking.

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A business I know of in the UK tried to set up a call centre in this country to service the Indian market. Would the Government of India allow this? No chance! So much for free trade.

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