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‘Modi mania’ has pushed valuations too far, says EM equity star

‘Modi mania’ has pushed valuations too far, says EM equity star

The Indian market is in a realistic position to experience sustained growth, but Citywire A-rated Thomas de Saint-Seine believes valuations have strengthened beyond investible levels.

De Saint-Seine, who is chief executive officer at RAM Active Investments, said they had cut Indian holdings in their $2.26 billion Emerging Markets Equities fund.

Speaking to Citywire Global, de Saint-Seine, who co-runs the fund with Emanuel Hauptmann and Maxime Botti, said they reduced positioning from 4% at the end of 2013 to 3.1% at the end of 2014.

‘In India, we are still underweight because they have predicted a lot of positive reform and we are more neutral about the situation. It will definitely be an improvement on the previous situation but we think the market has gone too far, especially from a valuation perspective.

‘What we can see is that the market remains extremely sensitive to the oil price but we think with the current low oil price there is a strong upside potential. Overall, we are optimistic about the potential for growth in India but the valuations are running away from us.’

The fund’s benchmark, the MSCI EM (Emerging Markets TR), has a 7.2% allocation to India and, despite seeing positives for the Indian market, de Saint-Seine believes better opportunities lie elsewhere in the emerging world.

‘Valuation has become expensive in India but, overall, we are not pessimistic on Indian economy; we just think you can find more attractive valuation in the region such as the H-shares in China for example.

‘The valuation of India reflects a lot of good news and the reforms will be long to implement within the country. We also think the country will benefit this year from the attractive price of energy.’

Taiwan on top

Instead the trio continue to favour Taiwan, which is an 18.2% position in the fund compared to a 12.6% benchmark weight. This is down from a height of 20.9% in the third quarter of 2014.

‘Taiwan remains our biggest bet within emerging markets and we still find some very attractive companies. We have found some very attractive companies, particularly in the area of IT and this we would expect to grow particularly given the links to China,’ he said.

Three Taiwanese IT companies feature among the fund’s top 15 holdings at present. These are Innolux, Hon Hai Precision and AU Optronics. The largest single position is a 1% bet on Chinese financials group Bank of China.

The RAM (Lux) SF-Emerging Markets Equities fund returned 35.2% over the three years to the end of December 2014. This is while its benchmark, the MSCI EM (Emerging Markets) TR USD, rose 12.63% over the same timeframe.

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