Lin shares about his views various facets of investments and India with Shoaib Zaman.
A lot of foreign investors are very bullish on India. Why overseas investors are being bullish on India?
I have been coming to India for last 25 years, since when I was an analyst. We used to do some research in India Over this span of time, I can’t remember the last time that I have seen such fundamental optimism from Indian people and the country over all. And that’s the key reason. The new government that has come in seems to be quite focused on implement reforms, to unleash the potential.
The conundrum of India for foreign observers in the past has always been you get a country that has such talented people and such raw potential and why are we not realising that potential. Perhaps what the Modi government is implementing. We can start to see some of that potential unleash and that is fundamentally why a lot of fund investors are so bullish on India recently.
Do you see revival in China and Europe?
Well Europe is still going through a period of structuring. There are some fundamental issues that many European economy are facing. Our view on Europe is cautiously optimistic. It will recover from its current financial and economic problems.
As far as china is concerned, China has experienced a decade of tremendous growth over the last few decades. China is also now facing some challenges which is structural – it’s been more of an investment led growth in the past that no longer going to work. So I think they are trying to shift more towards a demand driven growth and achieve balance. In the past it was growth at all cost, so now we are seeing environmental and other impacts; the social impact because now the income disparity is increasing. Social tension might be created, so I think it’s incumbent on the authorities in China to fig out a different path of growth that will be more appropriate for the stature that they are going into.
In your observation do you think they have come up with a blueprint for the next phase of growth?
I think it’s too early to tell. I think there is a lot of focus on it. They have started to make some of the right noises about what to intend to do. But with China, devil’s in the detail, so we will wait to see the actual implementation to be able to make a decision.
People believe that US economy is out of the woods. What is your view on the US economy?
The American economy is actually doing reasonably well. I mean not on an absolute basis but on a relative basis of what is happening around the world they are doing very well. When we compare to Europe, China, or Japan; they (USA) are the ones who took the most aggressive stance to get down to the crisis and therefore I think they are the most advanced into emerging from the most recent five years we see on all sectors whether its unemployment, corporate profits or any other metric; the US economy is in reasonably in good position.
What is your view on the Japanese economy given the measures the new Prime Minister is taking to revive the economy as a whole?
I think the Japanese restructuring process is ongoing, it’s not complete. In fact of the chief advisors of PM Abe is an academic. He gave PM Abe the score card with his initials as ABE. For monitory policy the he gets an A, for fiscal policy he gets a B and for the structural reforms, he gets an E. So it’s better than F but it’s nowhere near where it should be. This was a scorecard which one of his own advisors or architect of the program has given. So I guess we still need to wait and see how that process turns out.
In 2015 which country do you think will perhaps have the best outlook?
It’s hard to make that prediction at this point because there are so many volatility in the world today. We are a bottom-up investor and we are constantly looking at the best opportunities. India is also one of the countries that we are looking at this point.
Have you recently increased your position to India?
It’s a constantly changing and the portfolio view is very dynamic. From a regional perspective, benchmark we are overweight on India.
What risks do you think India faces in 2015?
The chief risk I believe would be whether we can maintain the current path of reform and the momentum. Whether different interest groups will start to derail some of the discussions and policies. So far as we can see, Prime Minister Modi is doing a great job, but its early stage, we will need to see how this unfolds.
Do you think there is any international risk that India investors are not taking into account?
No actually I think if there is anything Mr Modi has done a great job to manage the geo-political position of India. He has very smartly positioned India in between the on-going conflict between Japan-US-China. He has very nimbly placed India. I think he has done a great job on the political side internationally.
Do you consider yourself to be a value investor or a momentum investor?
We are very much a value investor, we need to be a mindful of the market movement because we are part of the market. So it’s like the ocean tide, it can carry you away if you are not careful but we are very much sticking to our fundamental value based investment process.
Within value investment there are so many different shades like Graham and Buffett both are known as value investor. How would you define your value investment philosophy?
We are very much a growth at a reasonable value type of investor. So we will take growth into account. We are not deep value or dogmatic in our approach. By a certain analysis a certain PE for a company may look expensive but however if our analysts tells us that the growth over the next few quarters will be higher, then perhaps that PE number as a snap shot may not represent the full value of the company. I think that would explain our philosophy towards value investing.
From that perspective what is your view on India? Do you think it is fairly value or expensive?
Now again it depends upon your assumption. We don’t think it is cheap but we also don’t think it is extremely expensive either. So it’s really bottom-up analysis for companies that we do, we identify opportunities that based on our growth assumption we think offers reasonable value.
P.S. This is the submission draft. The actual story had appeared in January 2015 issue of Money Today. To read the final version. Click here or copy paste the given below link -http://businesstoday.intoday.in/story/jack-lin-on-foreign-investment-in-india-2015/1/214114.html
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