Ashburton is soon to launch a Chindia Fund, a 100% equity fund that will enable retail and institutional investors to benefit from the tremendous economic growth that is taking place in China and India.
According to Jonathan Schiessl, Investment Manager at Ashburton, global economic power is gravitating towards China and India (collectively referred to as Chindia).
He says the sustained surge in consumption by China and India will primarily drive future growth acceleration. "Consumer demand within China and India is growing exponentially as a result of a big mass of people that are forming a generation with much higher aspirations."
Since 2000, the number of dollar millionaires has been growing by 15% a year in China and by 18% in India. China has 320 000 dollar millionaires and India over 80 000. "Both these growth rates are expected to continue", says Schiessl.
He says the Chinese economy is expected to grow annually by between 8% and 10 % for the foreseeable future, while a growth rate of 8% per year is projected for India. In fifteen years time, these two countries grouped together will be the second largest economy in the world, worth about $16 trillion dollars, compared to R4 trillion at present.
This growth is primarily driven by demographics. "It's really just a numbers game", says Schiessl. Chindia is expected to add 250 million people to its working population by 2020, whereas the US and Europe will be lucky to add 6 million over the next 14 years. Chindias population is expected to grow by 370 million people over this time period.
Schiessl comments that global stock markets will reflect these shifting economic and demographic trends. "We believe the US and Europe are in a bear market and will be stuck in a trading range for the next five years. On the other hand, Asia, specifically Chindia, is in a structural bull market.
"For example, the current price of the Indian stock exchange [SENSEX] is trading near 13 000. Based on the numbers we have, we believe the Index fair value by 2010 could be 40 000."
"While some of this upside potential of these economies is already priced into stock market prices, we believe corporate earnings along with economic reforms are going to drive these markets higher."
Investors will also benefit from Ashburtons substantial experience in the Asian markets. "We have been running Asia Pacific money for ten years and our track record is in the top quartile over that period."
Creating the Chindia Fund enables us to properly recognise and focus on this region. It will provide clients with access to these vibrant economies, both through our managed portfolio services, where we are starting with a 3% weighting, and independently.
Schiessl says that while the majority of the new Fund will be invested in Chinese or Indian companies, it will also leverage off other multi-nationals that are operating outside these countries that are benefiting primarily from the Chindia story.
He added, "We have been preparing for this launch for the last couple of years, building our contacts and developing our understanding of the markets and of course obtaining the all important FII licence in India. Now we are ready and the market signals look absolutely right."
While the percentage invested between the two countries may fluctuate over time, the Fund's benchmark will be 50% MSCI China and 50% MSCI India. "In keeping with Ashburton's equity methodology, we will be following a bottom up stock selection strategy for the Chindia Fund. This will enable us to carefully pick the companies and sectors which we believe deliver the best GARP (growth at a reasonable price) to provide optimal returns for investors. True to the Ashburton philosophy, we will absolutely not be constrained by the benchmark."
At Ashburton, we remain absolutely focused on putting our clients first. We are now certain it is in our clients' best interests to be able to access these economies. Whatever route our clients chose, whether independently or via our managed portfolio services, they can benefit from the economic transformation of this vibrant region with confidence at Ashburton.
Get the latest issue of FAnews