Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
The atlas of global investment destinations can sometimes feel a little light. Of the 197 countries that make up our planet, it’s perhaps four or five regions that most investors think about.
Given our natural home bias, the UK probably springs first to mind - that despite our market contributing only around 6% to the total value of global shares. The US and China are the other obvious players, and with good reason. Besides that, you may think about Europe as a whole, or perhaps some of its larger constituent markets like Germany and France. And that, for many of us, is about it.
But there are some excellent opportunities out there which lie beyond our immediate horizons. Some require a keen eye and specialist investment nous. Others are hidden in plain sight.
India is a case of the latter. The country has long exhibited some key trends which look good for a long-term investment, the first being one of demographics. India’s population of 1.4 billion accounts for 18% of the world’s total population, while its median age stands at just 28.
That’s good from a growth perspective. Currently, India has the second largest workforce behind China. By 2050, however, India’s workforce is expected to grow by around 200 million, safely overtaking China in the process.
Meanwhile, existing trends of better education and increasing urbanisation are expected to continue over the coming decade. Behind them should follow average income and consumption levels.
But there are obstacles in the way. One is the steady stagnation of India’s manufacturing sector. Reforms and investment in infrastructure are needed to boost the sector, increase efficiencies and create further jobs. Many of the foundations have already been laid, and India’s Prime Minister, Narendra Modi, is committed to his ‘Make in India’ initiative, designed to further unleash the country’s potential.
But that’s not all. Slap bang in the middle of India’s long-term growth story sits the small matter of the pandemic. India has suffered badly, far worse than some of its neighbours. Whereas China is widely acknowledged as ‘first in, first out’ of the pandemic, India is still fully in the throng.
The market was hit hard as it entered the pandemic, which was understandable given that India was looking expensive at the time. But, like we’re seeing over here, measures used to adapt have accelerated trends which could support future growth.
What’s more, with Covid shifting the makeup of global supply chains, India and its large workforce could attract further attention from foreign companies.
Silicon Valley hasn’t been slow to notice this potential. Earlier this year, Apple announced its plans to shift some of its production lines from China to India, to cater to both export markets and India’s domestic demand. Other Big Tech giants have steadily been building their presence in the country.
And while such companies dominate their respective markets (WhatsApp, Facebook and Amazon are the most used apps in India), there’s also a blossoming domestic start-up scene which may be able to swoop in on what remains. A number of fintech and online education companies, for instance, have recently announced their plans to go public over the next couple of years.
Of course, this is an emerging market, and as such it could present a riskier investment destination than others. A full recovery from the COVID crisis could take time as well, even with vaccine hopes rising by the day.
But there is an encouraging outlook here, especially when parts of nearby China are starting to look expensive. A combination of favourable demographics, shifting supply lines and reforms designed to encourage growth could make India an attractive proposition for investors looking to diversify their portfolios geographically.
If you’re looking to invest in India, there are a number of funds to choose from which focus solely on the country. Alternatively, the Stewart Investors Asia Pacific Leaders Sustainability Fund, one of our Select 50 favourite investments, currently has 35.7% of its total holdings India, its largest position in any one country.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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