Dear Fellow Investor,
I have just returned from my first trip to Mumbai, India, and let me just say, it was interesting. I was very excited to see Mumbai -- the country's largest city and its financial and entertainment capital -- and what I discovered was a land of contrasts.
Although India has a rising number of world-class entrepreneurs, financiers and innovators, most of the country is afflicted by widespread poverty, a mostly poorly educated population, bad infrastructure and a broken government.
Wealth vs. Poverty: Four out of the world's ten richest private citizens are from India, and the country has over 50 known billionaires, one includes, the Warren Buffet of India, Rakesh Jhunjhunwala, who built his wealth from $100 to $1 billion in just 23 years. But this incredible wealth is a stark difference to the rest of India -- the country's average per capita income is less than $900 a year.
Education: India has one of the most respected institutions of higher learning in the world -- the Indian Institute of Technology (IIT). IIT is a combination of the U.S.'s Harvard and MIT. Yet, despite India's top-notch universities, nearly half of the adults in India cannot read or write. India's adult literacy rate over the past six years was 61%, while China's literacy rate is 90.9% and U.S.'s is 99%.
Infrastructure: The city of Mumbai is comparable to cities like Shanghai and New York City. But in terms of infrastructure, the city is at least a generation or two behind major Chinese cities. Much of Mumbai is filled with old and dilapidated buildings.
| Earnings Roundup! |
|
My China Strategy companies are rocking and reporting blowout earnings as of late. And my subscribers are reaping the rewards. Just take a look: Last week, our Chinese Internet play reported that its sales doubled and its profit jumped 87% in the quarter. The stock responded positively to the news, jumping 17% on the day of the announcement. Then our fertilizer company announced that its profit increased 217% since last year! The supply/demand crunch for food is keeping the need for fertilizer in strong demand, and it will continue to push this company forward in the months and years to come. The stock has popped 10% since the earnings release last week. To find out how you can rake in these types of profits, join China Strategy today! |
After observing Mumbai, I couldn't help but compare Hong Kong and India, especially since I just visited Hong Kong before arriving in India. I was particularly intrigued that two former British colonial cities turned out so differently. And my one conclusion for the stark contrasts was government rule.
While India's current prime minister, Manmohan Singh, desires to mimic China's success economically and turn Mumbai into another Shanghai, this type of leadership is often short-lived in India. Because despite being the world's largest democracy, India has suffered from a long history of corruption and isolationism. And today protectionism and government interference still exist in Indian business, which is allowing well-connected Indian business tycoons to amass immense wealth and the poor to fall even deeper into poverty.
In contrast, Hong Kong has never had a democratic election of its governor, but the city has enjoyed prosperity under the world's most free and open economic system. Its leaders are more focused on creating jobs and economic growth. That's why Hong Kong's per capita income is over ten times that of Mumbai's, its education system is growing and its infrastructure is incredible.
What Does It All Mean?
Based on what we just talked about, the picture's pretty bleak for India. Right now, I believe that India has a long way to go to achieve the level of economic success in China -- especially with the country's inefficient government, poor infrastructure, widespread poverty and poorly educated populace.
But India does have one thing going for it. It has a new generation of self-made business leaders, like Rakesh and my friends at Indian investment bank Equirus Capital, who want to and have the ability to spread prosperity to the rest of the country. Actually, Rakesh is staunchly bullish on his country's future, and his clarity of thinking on the subject was impressive. And, as you might have guessed, made for some interesting conversations.
The biggest thing I took away from my visit to India and my discussions with India's top financiers and money managers was this: Although there is a huge financial rift between India's wealthy and poor, the high skill of India's private sector business leaders is impressive. And it makes me optimistic regarding the country's long-term future.
But it's the short term that has me concerned. Right now, India is plagued by double-digit inflation, on-going trade deficit and depreciating currency. So we must consider the risk/reward ration that exists there now. Many of these wealthy investors made their fortunes during the recent India bull market, which has now been crippled by record-high inflation -- 12% -- and a slowing economy.
In addition, I think that the country has a long way to go before its poverty, education, infrastructure and government improve. And it will be a while before India reaches the level of economic success in China.
For all these reasons, I think it's best to continue to avoid investments in India right now -- there are a lot safer and more profitable opportunities in China. To learn more about the wealth-building opportunities in China right now, join China Strategy today.
Robert Hsu
