By Pooja Thakur
Nov. 28 (Bloomberg) -- India’s first terrorist attack against foreigners has done nothing to dent Mark Mobius’s confidence in the stock market of the world’s second-fastest growing major economy.
While Mobius says stocks may fall when trading resumes in Mumbai, the executive chairman of San Mateo, California-based Templeton Asset Management Ltd. is bullish because the economy is still “vibrant” and the Bombay Stock Exchange Sensitive Index is valued near the cheapest level on record relative to profit. AMP Capital Investors also expects any declines spurred by the attacks on two luxury hotels in India’s financial capital to be short-lived.
Exchanges shut yesterday after militants targeting Americans and Britons stormed into the Taj Mahal Palace and Tower hotel and the Oberoi Trident complex. At least 101 people were killed and 290 injured. India’s stock-index futures fell 2.4 percent yesterday in Singapore.
“It’s a fast-growing economy and we can’t allow this kind of incident to sway our decisions regarding where we want to invest,” Mobius, 72, said in a Bloomberg Television interview from Hong Kong. “India will rise from this and prosper.”
The assaults were the latest blow to investors after the worst global financial crisis since the Great Depression sparked this year’s 56 percent drop in the Sensex stock index, the biggest annual decline on record.
Trading Resumption
The Bombay Stock Exchange and National Stock Exchange may resume trading as early as today, along with bond, foreign exchange, commodities and money markets, bourse officials and the central bank said yesterday.
S&P CNX Nifty Index futures for November delivery slid the most since Nov. 19. Contracts that protect against a default by Mumbai-based State Bank of India Ltd. rose 15 basis points to 412.5 in Hong Kong, according to Morgan Stanley’s prices, the first increase since Nov. 20.
International investors sold a record $13.5 billion in Indian equities this year as of Nov. 24, according to data from the Securities and Exchange Board of India, as the economy grew at the slowest pace since 2004 in the second quarter and global credit losses and writedowns approached $1 trillion. Investors bought a record $17.4 billion in 2007.
“In this environment of extreme risk aversion, the bombing probably will give investors a fright,” said Alistair Thompson, who helps manage Asian and global emerging market assets at First State Investments in Singapore. “India was facing challenges anyway with massive amounts of foreign money leaving in droves.”
‘Hammered to Death’
This year’s slump has left the Sensex index valued at 9 times the earnings of its 30 companies, less than half the four- year average of 19.3, according to data compiled by Bloomberg. The gauge traded at 8.4 times profit last week, the cheapest level since at least 2002.
“Stock prices have been hammered to death,” said Seth Freeman, who overseas $130 million as chief executive officer of EM Capital Management LLC. “I wish we had more capital to deploy at this point.”
India’s Finance Minister Palaniappan Chidambaram predicted last week economic growth will “bounce back” to 9 percent in 2009, from at least 7 percent this year, driven by record crop plantings, public sector pay increases and tax breaks. The International Monetary Fund in Washington said this month that India may expand 6.3 percent in 2009, the fastest after China among the world’s 20 biggest economies.
Global Trading Halts
The Sensex’s drop this year has still been smaller than China’s CSI 300 Index, which fell 65 percent, and Russia’s ruble-denominated Micex Index, which lost 67 percent. Brazil is the only one of the so-called BRIC nations to outperform India, with the Bovespa Index losing 43 percent.
Stock and bond markets in India were last shut in July 2005, after monsoon rains disrupted Mumbai and other areas in the western state of Maharashtra. The last time exchanges were closed because of a terrorist attack was on March 12, 1993, when bomb blasts in the city killed more than 250 people.
The Sensex posted a two-day, 3.5 percent rally following that attack. The gauge rose 3 percent the week after a train bombing on March 13, 2003. It fell 2.9 percent on Aug. 25, 2003, when car bombs left more than 40 dead, before finishing that week up 2.9 percent. Bombings on commuter trains in Mumbai on July 11, 2006, also didn’t prevent the Sensex from climbing 3 percent the next day.
“After these things, you often see a knee-jerk reaction,” said Nader Naeimi, a Sydney-based strategist at AMP Capital, which oversees $85 billion. “I don’t think these attacks will have any lasting impact at all. The market has adjusted to a world with the potential of terrorist attacks.”
To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net
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