I got an email on Saturday from a reader who wanted to know whether there were any ETFs that provide exposure to India for a UK investor.

Tony had left a comment on the water ETF post mentioning a water ETF for UK investors, so I asked him if he knew about any India ETFs for UK investors.

He sent me a detailed email about such ETFs, and I am really thankful for him for it. Using his email, here is a list of India ETF for UK investors.

db x-trackers S&P CNX Nifty ETF (India): This is an ETF that tracks the Nifty, which is one of the most popular indices in India. It contains 50 stocks and covers 22 sectors of the Indian economy. Total expense ratio of the fund is 0.85%. The assets under management are 279.54 million.

Lyxor has two India ETFs, both track the S&P CNX Nifty, one has the currency listed as GBP, and the other one as USD. Here are the two links:

Lyxor ETF India S&P CNX Nifty GBP: This one shows a year performance of +79.63%, and has 18.99 million assets under management. It has an expense ratio of 0.85%.

Lyxor ETF India S&P CNX Nifty USD: This one also shows a one year performance, assets under management and expense ratio same as the one above, but the currency is USD.

As you can see from the above comparison, these three funds are quite identical, the db-x trackers India ETF is much bigger in size, and that seems to be the biggest difference between them.

I first came across China’s garlic bubble on the Economist, which said prices in China’s garlic growing capital – Jinxiang have risen 40 times since March. China produces as much as 75% of the world’s total garlic, and is the biggest producer in the world.

Here are the ostensible reasons for this garlic mania:

1. Ward off H1N1: Some schools are mandating their students to eat garlic with lunch every day, as they believe it wards off H1N1. This seems to have triggered a price rise because people are buying garlic as prevention to this virus. So much for people worried about actually getting the vaccine.

2. Reduced garlic plantings last years: Garlic prices had collapsed last year, and farmers moved to other crops reducing the land under cultivation. This led to reduced supply this year, and when demand built up, there wasn’t enough garlic to go around for everyone.

3. Garlic hoarding: There are reports that coal mine bosses are engaged in hoarding garlic. They buy garlic and haul it between warehouses keeping supply low, and fueling the price rise.

4. Increased exports: There is increased garlic demand from abroad, possibly for the H1N1 reason, and this is also fueling the fire.

5. Speculation: Increased liquidity is funneling money into various assets, and garlic happens to be one of them. Combined with the other factors, speculative trading is leading to price rise. Among all reasons, I think this one must contribute the maximum.

Just like demand from India and China didn’t explain the rise in oil prices sufficiently, just the demand and supply factors can’t explain this spectacular gain in garlic prices.

Amazing what goes on around the world.

Growth Enterprise Market (GEM) is the brand new stock exchange of China. It is a NASDAQ style stock exchange aimed at providing finance to smaller companies.

It started trading last Friday, and on the first day of trading — created 13 paper billionaires. 28 companies listed on the GEM, aka ChiNext, and they rose between 76% and 210% in the first day of trading.

It’s another thing that 25 out of these 28 companies fell on the second day, and many of them fell by as much as 10% (which was the lower limit).

I read a few articles about ChiNext or GEM, and there were several things that caught my eye:

1. Volatility: The first thing that I noticed was volatility. Anyone following the Chinese IPO market will not be surprised by it, but it’s hard to not take notice of. China’s IPO market is the biggest in the world right now, and the IPO market is really hot there. Given this backdrop, regulators were expecting volatility, and it seems they have created some rules to curb speculation, and have warned investors that they will crack down on aggressive speculation.
2. Spur Innovation: GEM is created to provide an exchange to start ups and smaller companies to list — create wealth for their founders, and fund future growth. GEM is much smaller than the Shanghai or Hong Kong Stock Exchange, but regulators hope that it will eventually compete with NASDAQ. Only 28 companies have listed so far, but many smaller companies are lined up to list on GEM and raise funds. GEM is made for smaller, technology oriented companies.
3. Dominate something other than low cost manufacturing: A stock exchange of this kind looks to support smaller companies that are more nimble in nature, and are looking to make money by being more innovative, rather than being cheaper. This looks like a strategic thrust towards growing companies that can not only dominate low cost manufacturing, but also deliver high end technological breakthroughs.
4. Correct Structural Imbalance: The Shanghai stock exchange is dominated by government enterprises and there are fewer opportunities for smaller and younger companies to list there. A lot of these companies end up listing in Hong Kong or overseas to raise money. By setting up a domestic stock exchange with the ostensible purpose of facilitating funding for smaller companies, — China is looking to bring a little balance to its stock exchange structure.
5. Bold Action: While the rest of the world is busy worrying about double dip recessions, auctioning spectrum, declining exports or generally being gloomy, China is taking bold action. You would think that setting up a stock exchange just after such a bad bust would be difficult, — and yet, that is exactly what the Chinese have done.

It will be interesting to see how this stock exchange grows, and if it does well, it will certainly be a good model for a lot of other emerging countries to follow.

At first I thought it was not reading it right, but I was: Sinopharm Group Company, which is China’s largest drug distributor company, recently came out with an IPO, and the issue got oversubscribed 570 times its Hong Kong part!

It attracted about 884 billion dollars (Hong Kong not Zimbabwe), and raised its maximum of HK 8.73 billion dollars. It just goes to show how hot this IPO market has become. In the past I have written about how this is shaping up like a bubble, and this promises to grow much bigger and bigger.

You will be sorry if you don’t find the greater fool, but until then, you can have your share of fun. I am quite amazed at the pent up retail demand that China has, and it goes to show that people there are dying for some action.

They are getting some action too. In July, the first Chinese IPO this year: Sichuan Expressway listed in China, and tripled in the first day of trading, and hit the circuit breakers twice in one day.

I have no means to participate in the China IPO market, but I wouldn’t touch it with a pole, even if I had the means. When others are greedy you should be fearful, and if an IPO is getting oversubscribed 570 times, you know what the investor mood is like. There are Chinese ETFs that I could invest in, but looking at all the IPO hype, I’d stay away from those too.

The way markets around the world have sharply run up makes me a bit uneasy too. The Indian markets are up about 100% in the last six months, American markets are up about 50%, and that’s just a bit too sharp for me.

What about you? What do you think about such extreme numbers? Do you think it is just a natural reaction or is there a devil in the detail that I am missing?

Image by betta design

For a brief period I worked with an Indian washing machine company. My boss there told me how they were scared when India was liberalizing, and companies like LG and Samsung were entering the Indian markets. Those companies had enormous resources, advanced technology, competitive pricing and almost everyone in those days thought that they will drive others out of business.

That never happened of course. Everything just went fine. My boss said that a big part of that was local knowledge. They had developed a sort of an ear for local nuances, which gave them an edge over the LGs and Samsungs of the world.

I was reminded of this yesterday when I started hunting for reasons why Baidu does much better than Google in China (I don’t remember why I started doing this). Baidu is a search engine, much like Google, and has a commanding position in China.

Here are a few interesting things I came across while hunting for reasons why Google trails Baidu in China.

1. Google is not a natural word for the Chinese: Google is not a natural word for the Chinese and people had trouble remembering it. This played as a big negative, and eventually Google got hold of g.cn – which is its Chinese version. That may be the shortest web address ever, and it was bought to overcome the problem of introducing a product that the locals can’t remember.
2. Search results in traditional characters: I read this interesting comparison between Google and Baidu, and one of the things it mentions is that on occasion Google returns more search results in traditional Chinese character that’s spoken in Taiwan, Hong Kong and by overseas Chinese. People in mainland China are not too comfortable with the traditional character, so they shy away from such results. These search results make Google look foreign to mainland Chinese users.
3. Better in localized searches: The same comparison uses a local phrase and finds that although Google results in a much larger number of results, they are not relevant. Baidu comes up with fewer but far more relevant results.
4. East is best: Another interesting article I found said that a lot of times Baidu has smartly positioned themselves as knowledgeable locals while portraying Google as clueless foreigners.
5. Download music on Baidu: One of the big things about Baidu is that: it is used to download music, much of which is copyrighted, but Baidu says that just linking to such music doesn’t break any law. This was something that Google didn’t do initially, but later started doing through its intermediary Top 100. This gave Baidu a distinct edge over Google.

Despite all these factors, Google has been making good progress in China, and has grown its market share from 2% in 2003 to 29% last year. They are not Google for nothing. They have focused on the market and are trying out a lot of things to grow. It only remains to be seen whether they’d be able to beat Baidu one day or not.

I have no knowledge of the Chinese search market, and this is just a result of half an hour of Googling that I did.

I’d be really interested to hear if someone has firsthand experience of using Baidu and what they think about it.

The Japanese elections have just concluded yesterday, and a major political change has taken place there. The ruling party: Liberal Democratic Party (LDP), which has been ruling for the last 50 years or so (except for a brief period in 1993) has been defeated by the main opposition: Democratic Party of Japan (DPJ).

DPJ won quite easily scoring 302 out of 480 seats in the lower house, and this comes at the back of a 70% voter turnout, which is the highest in the last two decades.

Mr. Hukiyo Hatoyama is the DPJ’s leader, and will probably be the next prime minister. He is a PhD from Stanford University, and the grandson of a former prime minister.

As part of his campaign he has promised to increase pensions, scrap school fees and road tolls, reduce taxes for small companies, and pay parents an annual allowance of $3,273 per child.

Japan’s population has actually shrunk in recent years, and the child allowance is a way to encourage people to have babies. The ratio of labor force to the population has also declined with the ageing population, and setting this right seems to be a high priority for the DPJ.

It’s not the population alone, when it comes to Japan, almost every economic indicator shows stagnation or negative news. The Nikkei 225 peaked at about 38,900 in 1989, and is only about a fourth of that today!

The national debt is over 800 trillion yens, and the debt to GDP ratio is about 200%.

The second largest economy has been stagnating for a while now, and the lost decade of Japan may have ended in 2000, but real growth is nowhere to be seen.

The new government has promised a lot and it’s hard to see how those promises will be fulfilled, given the high debt and low growth. Their manifesto speaks about aligning themselves better to Asia, and the new leadership seems to be looking that way to fuel their future growth. Only time will tell whether an Asian focus will solve their problem, but if nothing changes, it’s only a matter of time that China overtakes Japan as the second biggest economy in the world.

I don’t know whether that will happen or not, but I certainly wish the Japanese good luck.