[T.S.R:16706] Citibank Goes Underweight On India

Markets — Underweight: India, South Africa, Mexico, Turkey 

Overweight

: China, Korea, Malaysia, Thailand, Czech Rep, Russia, Peru; Neutral: Brazil, Taiwan; .

Bullish —

We reiterate our positive view on emerging markets for 2011; our endyear target on the MSCI GEMs index is 1,500, a gain of around 30%.  

Solid Fundamentals — Supports: i) global recovery; ii) ample liquidity, with the Fed on hold in 2011; iii) a structurally weak dollar; iv) solid earnings momentum and attractive valuations. The risks: i) the scale of monetary tightening in GEMs, although real rates are negative in many countries; ii) the EU sovereign crisis.

1993, 2005? — We believe the bull market entered its third year in late-October. Average Year 3 gains in the early phase of global recovery (as now) are c.50%. The best calendar year parallels are 1993 (+71%) and 2005 (+30%). 

Big Market Bounce — Small markets outperformed the 'Big Seven' GEMs by 700bp in 2010; Brazil and China were the laggards. Boosted by a return of 'crossover' money and attractive valuations, big markets should rebound in 2011. 

Regions — We stay Overweight in Asia (the growth area in GEMs). We raise CEEMEA to Neutral (low valuations and benign interest rates) and cut Latam to  Underweight (lower earnings momentum and aggressive monetary tightening).  

Sectors — We retain a high-beta cyclical bias, but with a preference for domestics over global cyclicals. Overweight: Consumer Discretionary, Financials, Industrials.

Materials are a

Neutral and we stay Underweight in Energy.

 

 

Model Portfolio — We are making a number of changes to our stock portfolio (p.5), which is up 29.8% since inception in May, thus outperforming by 400bp+.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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