Emerging Growth - India and Russia
08/22/2003 12:00 am EST
Yiannis Mostrous may keep a lower profile than his associates at KCI Communications, but that makes him no less important to the overall team. Neil George notes that Yiannis is the "behind the scenes guy" who does in-depth research into many of the companies that are recommended throughout the organization. Here, Yiannis looks at opportunities in Russia and India.
"Recommending Russia as an investment has always been intriguing," says Yiannis in the latest Personal Finance . "The country's size, its natural and human resources, and the long-term domestic demand story have fascinated investors for centuries. Needless to say, 70 years of harsh Communist rule was a huge drawback that the Russians are still trying to overcome. Recently, the Russian market has been in turmoil because Platon Lebedev, the second in command of Yukos, the biggest private Russian oil company, was arrested on embezzlement charges. This incident is a reminder of why investors should be mentally and financially prepared for a rough ride when deploying funds in Russia.
"That said, Russia remains one
of the most important and exciting emerging markets in the world. President
Putin--despite his drawbacks--has been steering the country toward economic growth while trying to
modernize its institutions. Economic growth has been helped by strong real wage
growth, loose fiscal policy, and negative real interest rates that encourage
spending instead of saving. Furthermore, the appreciation of the ruble has given
people more purchasing power, while forcing them to convert a big chunk of their
dollars into rubles.
"Russia has large current account surpluses and the central bank's foreign exchange reserves increased to $65 billion, or 35%, in the first six months of 2003. Of course, these surpluses are starting to become inflationary, and therefore we expect the ruble to appreciate more. Wimm-Bill-Dann Foods (WBD NYSE) remains one of our favorite international food companies. The company is a Russian manufacturer of dairy and juice products. We consider the stock a buy below 20. In addition, Morgan Stanley's Eastern Europe Fund (RNE NYSE) is the easiest way to play Russia for the long term. Buy."
In Wall Street Winners , Yiannis turns to India: ""In our view, the India investment story is a micro one. India offers an array of excellent investment opportunities on a company specific basis. Stock market investing is, first and foremost, about picking the right companies. And good Indian companies have rewarded patient investors handsomely. India has two of the most promising exports of Asia: Information technology and services outsourcing and generic pharmaceuticals. One of the Indian companies we like is Dr. Reddy's Laboratories (which is profiled in this issue in the article entitled 'Triple Play for a Volatile Market'.) As for pharmaceuticals, we would note that India now has the largest number of pharmaceutical plants approved by FDA outside the US. We also like Infosys (INFY NASDAQ), a global information technology services company. On the technology side, IT export revenues were close to $10 billion for the year ended in March 2003. In the next five years IT exports are expected to surpass $40 billion. Note that Infosys, as a technology company, is quite volatile. Hence, interested investors should be long-term oriented and try to scale into the position."