In our second consecutive one-off mid-week special Brewin Dolphin’s Guy Foster and Ben Gutteridge get the chance to interview none other than the experienced Asia Pacific fund manager Angus Tulloch with his senior equity analyst Chris McGoldrick.

Angus has just returned from a trip to China and so is full of insight into the world’s second largest economy. China’s markets have experienced a bit of a sugar-rush rally, while India’s recovery has been somewhat more sustained. Both are renowned as undergoing reforms and have controversial monetary histories (decade of currency manipulation in China, decades of depreciation and double deficits in India).  In fact India went seamlessly from being one of the fragile five countries with budget and current account deficits until its spectacular turnaround last year.  For overseas investors returns from India have been heavily influenced by the performance of the Rupee. But then in the past India had high inflation to contend with.

One of the reasons for becoming more positive on Asia as a whole is that monetary policy will be loose stimulating more demand. Relative to the developed world, food and world energy prices form a larger share of consumers’ household expenditure and so the fall in prices should benefit Asian consumers more than other regions.  Both China and India have subsidised fuel prices in the past, however recent falls have given governments an opportunity to reduce or remove those subsidies.

The question is whether the cyclical benefits of lower energy prices are transient or whether there will be more lasting benefits from the reforms being imposed by the latest governments in both countries. 

According to our investment clock Asia, and India and China individually, are moving quickly through the stagnation phase – the waiting room for recovery. There are, however, differences between the two which could reveal differences in investment performance.

 

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