Investors looking for companies that have the potential to become “future majors” should look to India, according to Kunal Desai of Gulf International Asset Management.
The portfolio manager said India's geopolitical positioning is “favorable in the era of Trump 2.0” as investors assess the country's ability to benefit from a potential trade war between China and the US.
President-elect Donald Trump has pledged to impose significant tariffs on goods coming from China when he takes office. Customs duties on goods imported from China into the United States India is likely to benefitAnalysts say companies are shifting manufacturing to the South Asian country to avoid tariffs.
Speaking to CNBC's Silvia Amaro, Desai described India as “perhaps one of the most attractive, secular and scalable investment opportunities in the world.”
In addition to geopolitics, Desai cited the country's monetary sovereignty, improving return on equity – a key measure of a company's profitability – and increasing private investment as reasons to invest.
Prime Minister Narendra Modi's 'Make in India' initiative was also the case Analysts cited it as a major boon For some Indian manufacturing companies.
For Desai, “one of the most attractive areas is cables, power cables and wires, which are involved in the development of urbanization and infrastructure projects in India.”
He said that these companies not only view India as a “core market”, but are also seeking to expand and start exporting.
“Given the difficulties that Chinese companies have faced from an export perspective, a number of Indian companies are benefiting from this as customers look to take a dual-sourcing approach in their supply chain,” Desai said.
Optimistic about Chinese stocks
Although investors are concerned about Trump accelerating “hardening China policies” upon his return to office, the portfolio manager said rising tensions between the US and China — as well as… The widely expected GDP growth target for 2025 is around 5%. and Fiscal stimulus And from Beijing – he could “put pressure on Chinese policymakers, mainly to revive the local animal spirit.”
Desai said companies with “high brand strength,” competitive advantages and high profitability are most likely to benefit from a potential consumer rebound in the coming years.
“So, this creates a very interesting opportunity for companies that have seen their relative valuations decline, but can now create a more optimistic outlook for the years ahead,” he said, adding that Yum China He could be the main beneficiary.
Yum China is one of the largest fast food restaurants in China within Yum brands umbrella, which includes KFC, Taco Bell and Pizza Hut.
Desai also expects the Chinese e-commerce giant JD.comamong the top 10 holdings in his portfolio, to benefit from a potential consumer rebound.
He said that the next 18 months will witness a “A really strong earnings, buyback, capital return story is going to happen in China, which is actually what we've seen in the U.S. over the last four or five years.
