Asian equity specialist Coupland Cardiff Asset Management is launching a daily dealing Irish fund to tap into the rapid growth in domestic demand in India, Bangladesh, Sri Lanka, Pakistan and Myanmar.
The CC Indian Subcontinent Fund is aimed at targeting opportunities within the region that are benefiting from a large domestic market rather than those reliant on export trade.
The investment team consists of Abhinav Mehra, based in Singapore and Andrew Draycott, based in the UK and is a high conviction, index agnostic, concentrated long-only equity portfolio of 25 to 40 stocks.
It is focused on high growth and high-quality companies that benefit from domestic growth and strong corporate governance with demonstrable track records.
The Indian subcontinent has a population of 1.7bn which represents 24% of the world’s population and a GDP of $2.84trn (£2.15trn, €2.45trn).
Yet, despite this, the area has minor representation in global indices with the India subcontinent representing just 2.9% of the world’s market cap.
Nominal GDP in India alone currently stands at $2.2trn and is predicted to hit $6trn by 2027 which would make it the world’s third largest economy.
Key drivers of future growth in the region include:
Demographics
India has a population 1.35bn, the second largest in the world, with the median age of just 28.
The rest of the Indian subcontinent has a population of 500mn and is on a high growth track similar to that delivered by India in the past decade.
Rising discretionary consumption and 13 million people entering the workforce annually.
Political and economic reform
Both India and Bangladesh have single party majority governments which are under-taking the biggest reform agenda in 2 decades.
The rest of the Indian subcontinent is ‘learning’ from India’s example with a tax amnesty in Pakistan, VAT & strengthening tax administration in Bangladesh, resulting in higher Tax compliance and a greater formalisation of economies.
De-monetisation in India is creating a savings shift to financial assets.
Rapid growth and under-valued markets
India is the world’s fastest growing economy and is expected to deliver an average annual growth of 7.73% during 2017-19.
Strategic location of the Indian subcontinent – its proximity to two Asian giants has massive benefits, such as higher foreign direct investment, access to big markets for exports, trade co-operation and China’s ‘One Belt, One Road’ policy.
The rest of the Indian subcontinent is under-researched making it cheaper than India for similar high growth and quality companies.
Less affected by external influences
Richard Cardiff, chief executive of Coupland Cardiff Asset Management, said: “The Indian subcontinent comprises countries with some of the fastest economic growth in the world, some of the youngest populations and rapidly growing consumption.
“By focusing on stocks benefiting from domestic demand, the portfolio is less affected by external influences on trade. The results of recent economic reforms are already beginning to bear fruit with the tax-to-GDP ratio growing consistently from 9.7% in 2015 to 11.7% in 2018.
“The companies we are looking at are non-cyclical – those having continued to grow in spite of a poor economic cycle and those that are leaders in their field with a growing market and pricing power. These companies will also benefit from a widening competitive advantage with scale.”
He added: “The Indian economy is growing at a rapid pace but it is still where China was 12 years ago. Bangladesh is where India was seven years ago so opportunity for further growth in the region over the coming years is clear.”
