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How Allianz's new Bric man has overhauled his fund's foundations
by Elsa Buchanan on Nov 05, 2013 at 10:49
Ghosh took over from former manager Michael Konstantinov in September and has sold out of a number of consumer discretionary and consumer staple stocks, upped his allocation to non-Bric names and reduced the fund’s allocation to commodities.
‘Although I am bullish on the consumer story in the Bric economies, I only hold three consumer discretionary assets in my top 25 holdings, and these only represent 7.3% of the portfolio,’ Ghosh said.
He is also overweight information technology with a 25% position, compared to the MSCI Bric Index’s 8.3% and healthcare at 4.4%, but is underweight all other sectors.
Regionally, he is bullish on China, with a 27% weighting. Six of his top 25 holdings are based in the country, albeit spread across different sectors. These include a combined 6.7% holding in tech names Tencent and Lenovo, a 2.9% weighting to real estate through a holding in China Overseas Land and Investment, and a 2.8% position in hotel operator Sands China.
‘China has been built on cheap labour, but manufacturing costs have crept up over the last decade on the back of the country’s single-child policy and a labour shortage. It has lost the competitive edge it had in the 1980s, but opportunities can still be found in its internal consumption,’ Ghosh said. While he is underweight the other Bric countries (Brazil, Russia and India) he remains more positive on India, where he sees opportunities in Hindustan Unilever and tobacco company ITC, which he describes as ‘long-term quality consumption’ stocks.
Ghosh also favours HDFC bank as an ‘unparallelled bank in the emerging market space’, but urges caution elsewhere.
‘In India, to have a strong consumption theme you need a strong currency, but inflation is sticky and the Bank of India cannot lower interest rates so banks can be a risky investment.’
But he is also finding positive themes to play in this high inflation environment. Although the cost of imports is rising, he points to better earnings for export-orientated companies.
‘It is a cyclical slowdown, but India offers good export franchises, such as pharmaceuticals and automobile Tata Motors. One man’s misery is another man’s joy,’ he said.
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