[ad_1]
In the latest weekly Greed & Fear note, Wood said the situation in countries like India and Indonesia is in contrast to the US. USA, where the Small Business Administration’s Paycheck Protection Program will provide up to $ 349 billion in forgivable loans to small businesses to pay their employees eight weeks during the health crisis.
“… in countries like India, with a young demographic, this blockade causes more human suffering than Covid-19 itself. Unfortunately, this continuous blockade makes it increasingly inevitable for India to undergo a cycle of consumer loans”, Madera said in Thursday’s note. Wood, based in Hong Kong, said there is also a growing risk of leniency for local lenders.
It is also concerned about the continued weakness of the rupee amid the negative consequence of lower Middle East remittances as a negative consequence of falling crude oil prices.
PORTFOLIO CHANGES
Wood said there is no point in owning Indian banks in such a macro environment. Wood said that India has not really had a negative consumer credit cycle since the start of its portfolio in 2002, but that this is likely to change.
It has removed HDFC Bank, HDFC Life and ICICI Bank from its long-lived Asia ex-Japan portfolio. Wood has entered a 3 percentage point weight at Kotak Mahindra Bank as he believes the lender has the best growth story through past negative credit cycles and has raised capital this week presumably to prepare for tough times in the future.
Wood’s long-term Asia, ex-Japan portfolio has a 5% investment in Reliance Industries, which has been in the news as Facebook is buying a 9.99% stake for $ 5.7 billion.
Wood said he sees Reliance Industries primarily as an e-commerce move rather than an oil refining move.
Dependence is now 12.7% of the MSCI India index and 13.9% of the Sensex, which means that passive funds have to keep buying it, and active managers will be under increasing pressure not to underweight the stock like many of them said. . .
[ad_2]
