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Expat Investor : March 2008
March 2008 EXPAT INVESTOR 11 INVESTMENT NEWS What if you could guarantee your Euros worked as hard as you do? To find out more, about the Zurich Euro Reward Account call: +44(0)1624 671666 (quoting ref no. EP1) or visit www.zurichbankinternational.com 4.25% GROSS PA/AER* Variable Are you always having to move your Euros around to get the best rate? The Zurich Euro Reward Account's two guarantees mean you can take it easy while your money works hard. We guarantee your interest rate will be at least 0.25% above the European Central Bank Base Rate until 1 January 2009, then we guarantee that your interest rate will be no more than 0.25% below the European Central Bank Base Rate until 1 January 2011. We also give you security and easy access to your money. So for great returns, relax and leave the hard work to us. • A low minimum investment of 5,000 • Personal service, with no call centres www.zurichbankinternational.com Instant accress to your money *AER stands for Annual Equivalent Rate which is a notional rate which illustrates the contractual rate as if paid and compounded on an annual basis. Assumes rates will remain unchanged for 12 months. Zurich Bank International Limited, PO Box 422, Lord Street, Douglas, Isle of Man, IM99 3AF, British Isles. Telephone: +44 (0)1624 671666 Fax: +44 (0)1624 627526. www.zurichbankinternational.com Registered office: 43-51 Athol Street, Douglas, Isle of Man, IM99 1ET, British Isles. Zurich Bank International Limited is registered in the Isle of Man Number 22847. Telephone calls may be recorded. Licensed by the Isle of Man Financial Supervision Commission for banking business. R Indian equities are here to stay Fast Facts 33005 Fast Facts 33191 Fast Facts 33190 Fast Facts 33192 The Indian economy has grown from $32 billion at the start of the 1980s to more than $1 trillion today and, if current trends continue, it is expected to double within the next seven years. But after such rapid growth, many investors are asking, can this trend continue? Late last year, the Indian regulatory body SEBI proposed to implement measures to monitor the investment by Foreign Investment Instruments (FIIs) through Offshore Derivative Instruments (ODIs). Arun Mehra, manager of the Fidelity India Focus Fund, sees this as good news for long-term investors as it should make the market less speculative. It is his belief that, as the currency issues have been closely monitored by the government over the past few months, these measures will keep the rupee at "sensible levels". In terms of the FF India Focus Fund, Mr Mehra confirms he sees the market weakness as a good buying opportunity. "India is a ten year story not a two year story. There are a number of drivers behind the growth, all of which are long term in nature. India is changing and new themes are emerging all the time. For example, huge gas and oil fields have been found recently on the East coast which will have an impact on the rupee and imports. Lifestyles are changing, more people are using the internet and thinking about healthcare. Property development is also increasing." One of the biggest drivers of growth is the changing demographics. Wealth is increasingly filtering down to rural and traditionally low income sections of society, and India's middle class now totals 200 million. This number is expected to grow to 500 million by 2015. The country also has one of the youngest populations in the world, around half of the population having been born after 1982. As these young people move to the cities and their aspirations grow, lifestyles are changing. More people are using credit cards, buying mobile phones, eating out, shopping in big department stores and spending their money on healthcare, travel and luxuries. What we have taken for granted for years in the UK is now unfolding in India. Purchasing power is starting to come through UK investors say emerging market will outperform According to research conducted by New Star, 70% of sophisticated investors believe emerging markets such as China, India, Africa and Latin America will generate superior investment returns in the medium to long term in comparison to developed markets such as Europe, the US and Japan. The research, conducted in association with NMG, surveyed 334 sophisticated investors from across the UK. The survey revealed that 90% of investors had exposure to the UK, 40% had exposure to the rest of Europe, 22% had exposure to the US and 14% had exposure to Japan. In spite of the belief that emerging markets will outperform developed markets over the medium to long term, however, just 10% had exposure to China, 7% had exposure to India, 4% had exposure to Latin America and a mere 2% had exposure to Africa. Of those surveyed, more than half (51%) were considering increasing their exposure to emerging markets. With industrial output in the seven largest emerging economies of the world currently rising at 12% per annum, compared to just 2% for the seven major developed countries, the argument for investment in emerging markets is strong. Rob Page, marketing director, says, "This research shows that the potential of emerging markets appears to be well recognised, but investors remain cautious and appear to be willing to sacrifice outperformance for more familiar markets. This clearly highlights that the majority of investors lack balance in their portfolios and provides compelling evidence of the need for quality independent advice if they are to access the potential of the new economic world order." and households are moving up the income chain." While India is ahead of China -- the other big power house in Asia -- in terms of its service industry, it is at least 10 years behind with infrastructure development. "Infrastructure in the country is still very bad," confirms Mr Mehra. "However, this is starting to change and US$ 320 billion of infrastructure investment has been targeted from 2007 to 2012, with projects in place for improving roads, ports, telecommunications, airports, railways and power." Mr Mehra concludes, "India as an asset class is here to stay. The drivers of growth and trends in the market are both diversified and long term. With new trends emerging all the time, I believe India is a good long-term story for investors." Investec's offshore fund Investec Asset Management has launched its offshore Emerging Market Debt Fund. The Guernsey- domiciled Fund is a mirror fund to the existing OEIC Emerging Market Debt Fund, which was launched in July 2006, and which has delivered a "market-leading performance". The new launch fund is managed by Peter Erdmans and invests across a wide range of emerging markets, including Brazil, Chile, Mexico, Indonesia, Egypt, Nigeria and Russia. Mr Eerdmans explains that while his team primarily invests in local- currency government bonds and currency forwards, both these funds also take exposure to other areas such as dollar-denominated debt, corporate bonds, futures, swaps and options.
January February 2008