One of the news items in recent times was that the foreign exchange reserves had moved to more comfortable levels and that Indians are now once again allowed to invest a larger sum into overseas ventures (stocks, properties, businesses etc.). This amount had been curtailed from $200K per individual to $75k but now has been increased to $125k. Most of the time this kind of news would have been read and passed off as just one of those news items! But while perusing the charts of global indices during the weekend, I was surprised by the charts of Pakistan and SriLanka. Are you aware that the Karachi Index that bottomed along with the rest of the world in Mar 09 has moved from a low around 4700 to the current levels of 30600!! And we feel that Indian markets are moving big time! SriLanka has been no slouch either and even the not-really-thought-of Bangladesh index has been faring decently (though nothing compares with the way Karachi has run away!). Equally astounded to learn that SriLanka per capita is 3000 Usd compared to 1500 for India! Instantly one would quote the population sizes but hey, don’t forget that Lanka was at internal war and siege for the best part of the last 20-25 years! One of the ratios that fund managers use at a macro level is GDP to Market cap. Anything below 50% is taken as attractive. SriLanka is at 33%. Bangladesh is around 20%. For comparison, at current levels, India is poised around 79%. No cigars for guessing where the winners are going to be!
So what is the relevance, one may ask? While one may not really want to go and invest in Pakistan despite the fantastic run that market has given (for all sorts of different reasons other than investing gains), I was intrigued enough to go and check what similar stocks are priced and valued at in Dacca or Colombo. Take Bata for example. The company is valued at 41x and has a 20% market share in India but compared to that it has a 40% market share and is available at 13x! Bata India is being valued as much for its land bank as for its business and zero debt status but I find that the land value of Bata Bangladesh is less than its market cap and most other parameters are similar for both the companies! In SriLankan markets there are even more gems! Here is some more facts- MNC stocks in Nepal and Bangladesh have moved 100-400% in the last year and are still available at 15-20x!
All this may be more relevant for those that have the money and reach as well as the willingness to seek other pastures for investment returns. Many times we pass up opportunities simply because we don’t look at them. Our money lies idle in the bank because we think we can’t find good value stocks in our markets, what with many of them having run away. What could be better for a fund manager than an MNC company where you could plonk 20% into a single idea and, relative to India, they are growing at 25% and available below 20 times! The govt allows it, the limits have been increased and there is value to be found not too far away from our shores. All that is required is for a shift in our thinking. It may be time to look for MF schemes that invest into these kinds of equities. Or perhaps, start one?