A $40 Billion Manager Finds Surprise Haven in Emerging Markets

James Syme is putting his money on India, unfazed by a bank fraud scandal, a planned government tax on equity holdings and short-selling that’s hit a record high.

Stocks in India have potential for a significant rally, even as many emerging-market stocks look unattractive amid rising global rates, Chinese growth headwinds and expensive valuations, said Syme, a London-based money manager at JO Hambro Capital Management, which oversees about $40 billion.

"The Indian economy resembles a coiled spring waiting to be released," Syme said in an interview in New York. "Even if the Fed does four hikes or the middle part of the yield curve moves higher, even if Chinese growth slows, the Indian story can still come through."

Syme’s bullishness, which runs counter to short sellers, is buoyed by the fact that India’s economy is relatively closed off, and unlike developing nation peers such as Brazil, China and Turkey, the South Asian nation didn’t experience a credit boom during the past decade. That could change as next year’s presidential election nears, he said. His portfolio is heavily invested in cyclical names across India’s bank, auto and consumer and industrial sectors.

"The extremely positive environment for investing in Indonesian banks or Brazilian consumers in 2010, 2011, 2012 -- that’s where India could go in the next few years," Syme said.

The benchmark Sensex has lost about 5 percent this month, almost wiping out its 2018 gains as investors digest the outlook for interest rates and the extent of a banking fraud that Punjab National Bank told stock exchanges could be $204 million more than a previously estimated $1.8 billion. (Via bloombergquint)