To the Far East
11/03/2006 12:00 am EST
World-traveling investment guru Yiannis Mostrous focuses on one of his personal favorites in his latest issue - the growing economy and markets of India. Here, he suggests taking advantage of a company making waves in the financial segment.
"India has been one of my favorite investment themes for many years and remains, by far the most-exciting growth story among global emerging markets in general and Asia in particular. It is home to the most-diverse group of quality companies across a range of sectors.
"Although India never exhibited strong growth characteristics like the rest of
Asia and can't match China's reported growth rates, it's avoided the boom-and-bust cycles so prevalent in the region's developing economies.
"The Indian story remains a domestic one, in that domestic investment and consumption drive expansion, leaving the country less vulnerable to violent moves in the global economy. History has shown that relatively independent growing economies fair much better during global slowdowns.
"As more people have discovered India's potential, the market has become a little more volatile. But the story is still in the early chapters and, therefore, remains very interesting. India's quality growth story - as long as it remains intact - makes its market a strong buy after any hard sell-off.
"ICICI Bank (IBN NYSE) is a solid play on India's financial sector, one of the fastest-growing segments of the domestic economy. Aside from banking, mortgage operations and other related functions, life insurance is particularly promising as Indians have welcomed services now offered by private companies.
"The Indian market was first opened to foreign insurance investment in 2000. Since then, about 25 players have entered. Entry to the domestic market is accomplished via joint ventures (JVs) with domestic providers. The two largest foreign/JV players are Prudential ICICI Life Insurance and Allianz Bajaj Life Insurance.
"ICICI Bank has been capitalizing on the increase in domestic consumption and credit growth. Once not very well run but now a franchise in turnaround, ICICI is a good way to get exposure to India's banking sector as well as the life insurance boom.
"Prudential ICICI is the second-largest player and the largest private player in India's life insurance industry, which is still dominated by the state-run Life Insurance Corporation of India (LIC). Prudential ICICI has grown its new business annualized premium equivalent (APE) at 104% during the last three years and has improved its market share from 2-10% in the same period. Low penetration of life insurance in India (3% of GDP) and market share acquisition from LIC have been the key growth drivers."