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Allianz's Bric Star Ghosh questions Chinese growth concerns
by Elsa Buchanan on Jun 03, 2014 at 13:11
The issue is purely structural, he said, because the country’s reforms are not stalled by the federal government, but by state governments. He takes the example of the large retail reform, which was enacted to allow businesses to open up to foreign investors, such as Tesco.
While the reform was applauded by investors, only nine of the county’s 27 states have actually allowed foreign retail participation.
‘Of the projects that have been held up, only 25% are at the central government level. There is no low-hanging fruit for this new government to come and pick, or immediately implement change.’
Meanwhile, Ghosh said, Modi is poised to reshape the country’s logistics, including roadways and railway systems, which he expects will take up to three years to achieve.
In light of this and the weakness of the Indian rupee, the fund’s exposure is mainly export-focused in the auto sector with a 4% allocation to Tata Motors and a 3.1% position in manufacturer Apollo Tyres.
Brazilian consumer story
Ghosh’s overhauling of the fund’s portfolio has also seen him move into Brazilian consumer stocks, primarily in private sector banks and away from retailers, which are not able to pass on inflation to shoppers.
He has doubled his exposure to Brazilian bank Itau Unibanco, which he expects to deliver attractive earnings growth as well increasing his holding in insurance firm Porto Seguro.
He has also introduced a position in Cielo, a credit card processor, which now comprises 4.2% of the portfolio and is his second largest holding.
Outside of the Brics, where he holds 62% of the portfolio, Ghosh expects Taiwan, South Korea, Malaysia, Mexico, South Africa and Poland to show ‘meaningful growth’.
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