Monday, February 13, 2006

Investing - India vs China

In an article titled India vs. China: Where to Invest?, Jeremy Seigel points out the pros and cons of investing in India v/s China. A key point that caught my eye apart from all the Tiger and Dragon references and the usual democracy issues is the value of the stocks. He says
The price-to-earnings ratio on this index has reached 21, while Chinese stocks on the Hong Kong Stock Exchange are selling for only 15 times earnings. Goldman Sachs Asia Pacific Strategy recently indicated that it thinks valuation has turned the tide toward China.
The rate of growth on the BSE Sensex has made a lot of people quite rich, but also has doomsday predictions looming - referring to an impending to an imminent market crash, one that will hurt investors for a long time to come. Yet, I think that its atleast a year away, considering that the influx of foreign capital is not so much on promise (like the dot-com era in the 1990s), but backed up by solid performances by a lot of the companies. So while I am no economist, it seems like this growth will stay for a little bit - for atleast a year, if not more, as more and more FIIs continue to invest in the Indian markets. But Siegelman's points on risk, and diversification across the globe are certainly well taken.

One statement that particularly caught my attention was about corruption in India:
For India, these social networks and corruption are less of a problem. To be sure, dishonesty still exists in government service, but high level corruption is being vigorously rooted out by a free press that is absent in China.
I am not sure how accurate this statement is - while its not completely inaccurate either, there is a big leap of faith involved in making such a generalization. One Tehelka or Operation Duryodhan the basis of such a statement?

But by and large, an interesting quick read for someone thinking of investing in Indian/Chinese markets. And fairly accurate too, for the most part. Check it out

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