Gregg Greenberg
U.S. tensions with China, the world's largest emerging market, are increasing. What does this mean for future business with other developing countries like India?
The China juggernaut will not be adversely impacted by the recent U.S. tensions. These sorts of tensions have come and gone over the years with little impact to the long-term growth in China and the continued integration of their economy with ours. The ending of the Multi-Fiber Agreement, which limited certain types of textile imports from China and included preferential quotas for selected small countries like Cambodia and Bangladesh, has resulted in a doubling and tripling of some textile exports from China. Those tensions will benefit India in that buyers will want to diversify sourcing so as not to become too dependent on Chinese producers. There are other product areas where India will benefit to some degree from the desire of buyers to diversify their supplier risk. That will only be a marginal benefit to India. The longer-term opportunity for India lies in growth in exports in a variety of industries, and that will depend on the Indian government's ability to improve the country's infrastructure and further streamline the economy from the standpoint of taxation and regulation. What Indian companies do you like? We are substantially overweight India and have seen good returns from many of our holdings. Some of our biggest positions of names we like include Housing Development Finance, which does residential mortgage lending and lease financing for companies. Another is Reliance Industries, which is in energy, petrochemicals and telecommunications, all rather high growth industries in India. Which countries are most susceptible to a drop in commodity prices? What about higher interest rates? We have a diversified portfolio of stocks, some of which would be impacted by a decline in commodity prices. However, we are underweight materials relative to the benchmark and hence our portfolio would be less affected by a commodity price decline than many others. We are substantially overweight financials, and we will see some headwinds from higher interest rates, but not to the same degree as many other of the more developed markets globally.
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