Ive always been a strong believer in investing in emerging markets. Weve seen incredible growth in both China and India in recent years, but I think that the best is stillto come.
Yet many have been sceptical about the future prospects of these emerging nations. Theres been much talk of a slowdown in China, and political in-fighting in India. But if we dig a little deeper, we find that the fundamentals are remarkablyresilient:Chinese GDP has still been growing at 6.7% per annum, while India has been growing at 7.9%.
China and India: industrial powerhouses
The broad picture is that these countries are now industrial powerhouses, and theyre set to boom relative to more developed markets for decades to come.
Profitability at a range of companiesin these countrieshas been surging. Take China Pacific Insurance. Net profits were CNY9.2bn in 2013, and this jumped to CNY17.7bn in 2015. Revenue increased from CNY193bn in 2013 to CNY246bn in 2015. These are startlingly strong numbers.
Or take IndiasInfosys. Net profits were INR104bn in 2013, and this rose to INR136bn in 2015, while turnover climbed from INR493bn in 2013 to INR630bn in 2015.
Rank after rank of businesses has seen rapid growth in both revenues and earnings.
Ive chosen to invest in these countries with two investment trusts: Fidelity China Special Situations (LSE:FCSS) and JP MorganIndian Investment Trust (LSE:JII). How well have these done?
On 1 January 2016 FCSS was priced at 121p per share. It has now risen to 170p. Thats an increase of 40%. On 1 January JII stood at 477p. It has now risen to 641p. Thats an increase of 34%.
Why have the shares risen so much? Well, part of this is currency fluctuations. Since January the pound hasfallen by about 10% against the yuan, largely because of the Brexit vote on 23 June.
And this is a great time to invest
Also, stock indices such as the Hang Seng and the Sensex havebeen on the up. Plus, these are well-managed fundsthat have produced better returns than the overall markets in these countries. Whats more, a substantial amount of gearingfor Fidelity China has added to the growth.
Yet the amazing thing is,in terms of equities, were still really only at the end of a 17-year bear market, and the next bull market hasnt even got underway. That means there are likely to be many more stock pricerises to come. Thus, if you havent bought in yet, this may be a great time to get on board.
And what makes investment trusts like these even more attractive than standard funds is that they currently trade at sizeable discounts. The current discount on Fidelity China is 14.8%. While JP Morgan India is 10.2% cheaper than its net asset value.
Thats why Ive invested a large part of my portfolio in these funds, and I think you should too. People are often afraid of the growing power of these emerging nations. But if youre an investor considering buying into China and India, I would encourage you to make the leap.
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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.