Greenberg puts faith in India’s business reforms

After two years of strong gains, the BSE Sensex index has pulled back this year, in part due to fears that prime minister Narendra Modi’s reform programme is proving unsuccessful.

A slowing economy has prompted the Reserve Bank of India to cut its interest rate four times this year, and Mr Greenberg acknowledged India’s growth-focused strategy looked to be struggling.

But the manager, who had a 17.9 per cent weighting to India in his £366m fund at August 31 compared to his benchmark’s 8.4 per cent, said signs of progress were evident on a regional level.

He said: “We recently went to see whether the reforms that have been stymied and stagnated at a national level are happening at a state level, and it seems that they are.

“This is going to make India more open to direct investment, which will lead to better infrastructure.

“We are giving Mr Modi the benefit of the doubt. We think he will make progress and attract investors at the state level.”

Mr Modi has been attempting to enact a series of reforms aimed at making the country more business-friendly.

These include projects such as Make in India, an initiative that aims to encourage domestic and international firms to make their products in the country.

But some of the reforms have been hit by resistance. In September, the government abandoned a plan to seek parliamentary approval for the implementation of a goods and services tax, citing a lack of support.

Elsewhere, Mr Greenberg is also taking a positive stance on China, which makes up his largest country allocation at 25.6 per cent.

“Short sellers are saying China is a disaster and that the GDP figures are unreliable, but it’s not so black and white,” he said.

“Consumption and services make up a big part of the economy. The savings rate in China is extremely high and the country has a huge current account surplus.”

After a period of mainly “sitting tight” through recent market stress, Mr Greenberg is monitoring countries such as China, India, Taiwan and South Africa for “good quality stocks at a good price”.

He said: “Emerging markets are so under the cosh that it’s a good place to find opportunities.

“We think bottom up we are looking at double-digit returns, assuming nothing disastrous happens.”

The few portfolio additions he has made include Indian freight company Container Corporate – which he thought would benefit from infrastructure projects in the country – and Brazilian aviation firm Embraer.

But Mr Greenberg remains uncertain about the prospects for a number of emerging markets. He warned that leaders in Turkey, Russia and Brazil were neglecting economic growth because of geopolitical turmoil.

“The parties in these countries have been in power too long,” he said.

“They are taking their eye off the ball: the ball being helping the population achieve a higher standard of living. Consolidation of power seems to be the main thing they are doing.”

In Taiwan – which makes up 14.7 per cent of the portfolio – the manager thought corporate governance was strong, but feared the effects of an upcoming election and a weak economy.

Meanwhile, Mr Greenberg is struggling to find attractive companies elsewhere.

“We can’t find stocks in Malaysia, Mexico and Korea; we just don’t find attractive names there,” he said.

The fund has returned 14.7 per cent in the past three years, compared with the IA Global Emerging Markets sector’s loss of 2 per cent, data from FE Analytics shows.