Monday, September 14, 2015

Top CLSA Strategist Likes India, Throws Money Away on Gold Miners

He's smart but early on both.
We still see gold to $875 before all is said and done
From Barron's Stocks to Watch, Asia:

CLSA Strategist Wood: Bullish On India, Short Australia, Gold Miners “Absurdly Cheap”
Did investors place false hope in India? Which Asian markets to buy and avoid? What’s the commodities landscape looking like?

I caught up with CLSA strategist Christopher Wood today at CLSA Investors’ Forum in Hong Kong today.
Wood remains an unrepentant India bull, even though the Sensex Index has fallen 3.8% since we last spoke a year ago. “India is a relative return story,” says Wood, meaning it is still the best-in-class. Wood acknowledges that India has not entered a new investment cycle, but points out that its economy is bottoming and it is a large beneficiary from cheap oil prices. As a result, inflation there is collapsing and the Reserve Bank of India has plenty of room to cut rates. For background info on India’s painfully slow progress, see my last weekend’s column “Patience Will Pay Off in India”.

But Wood says he is disappointed with Narendra Modi government’s unwillingness to tackle with state-owned banks’ non-performing loan issue. CLSA estimates that distressed assets take up to 15% of total bank loans. The quickest way to fix this is separating state-owned banks into good banks and bad banks, but the government seems unwilling to privatize its banks and let go of control. Lack of government action there means it may take a long time for India to go back into an investment cycle.

Wood became wary of China and recently cut his Overweight of Hong Kong-listed Chinese stocks to Neutral, but he is unwilling to Underweight H-shares. This is because the H-share valuation has become cheap: MSCI China trades at only 8.7 times forward earnings, a good 25% discount to its long-term average. He would Underweight Shanghai shares except his Asia portfolio does not include mainland China’s stock markets....MORE