Valeria Vine adds: “India’s challenge has always been its infrastructure and often cheaper labour costs, which are just not quite enough to attract manufacturing away from China. The recently passed corporate tax bill is actually there to add a further incentive, because the tax rate is specifically lower for new manufacturing companies. So it’s a case of 15 percent versus twenty two percent. Now that there is a trend towards supply side diversification and improvements in infrastructure, and with a lower tax rate, hopefully we’ll see more companies willing to make that switch to India.”
Victor Kohn on India’s banking sector: “This is a very interesting sector because in some countries, the access to traditional banking is still very low and probably India and Indonesia are very good examples of that. The best managed banks here – the privately led banks – have superior management and technology. So you can see growth coming from three areas, strong growth prospects for GDP, a growing penetration of financial services as a percentage of GDP, and thirdly, and very important in a country such as India, the private sector banks are gaining a lot of market share from the state-owned banks. So these three pillars of growth are set to serve them very well for many years into the future.”
6. Frontier Markets
Victor Kohn: “By definition, frontier markets are markets that are still quite underdeveloped, at least on the equity side, and so the opportunities will tend to be company specific rather than market wide. There are quite a number of examples of companies which we have found to be very interesting. On the financial side, in Kazakhstan, both Halyk as a traditional bank and Kaspi as a new type of bank are very interesting, and in Uruguay, dLocal as a company that develops payments globally is interesting. A third area would be companies in Poland, which are developing games that have been sold worldwide. So very specific niches of companies in different countries.”
Valeria Vine adds: “Some of the rapidly growing trends as we mentioned can be sometimes tricky to capture because a lot of local companies are focussed on sort of old economy businesses. A good additional way to capture these opportunities could be through an approach that we call a new geography approach. This is where you focus on where the company generates its revenues, not where it’s necessarily domiciled. So if you think about delivery Hero, for instance, it’s a German company, but they soon realised that the food delivery business works better in areas with hot climates and high population density than it does in Western Europe. Another example could be a company like Network International, where they’re domiciled in the U.K., but it’s a payment company with a focus on the Middle East. Our new geography approach is one way and another route in is through emerging markets debt.”
