Episode summary
Investing in South Asia's emerging markets: India’s embrace of free enterprise
Capital Ideas Podcast
· · 30 min · Hosts: Mike Gitlin · Guests: Samir Parekh
Summary
Samir Parekh argues that successful investing in emerging markets starts with understanding the country as much as the company. He says local businesses like retail banking and food retail are shaped by domestic growth, regulation, and social attitudes, and that India’s long shift from socialism toward entrepreneurship has created a much better backdrop for wealth creation. He also emphasizes volatility as a feature, not a bug, of the markets he grew up with, and says his edge is filtering out noise and focusing on the one or two factors that really matter.
He is especially constructive on India over the next five to 10 years because of its low median age, stable politics, better inflation control, and a stronger cultural embrace of entrepreneurs. Outside India, he likes European banks, which he thinks still offer attractive returns as rates stay higher than during the negative-rate era, and Japan, where wage growth and shareholder-value reforms are helping the market escape deflation. He remains selective on capital-intensive businesses and loss-making biotechs, while saying family-owned companies can be powerful when family incentives align with shareholder wealth creation.
Key takeaways
- Samir Parekh says local businesses are really bets on a country’s growth, legal system, and social norms, not just the underlying company.
- He thinks India’s low median age, stable politics, and shift toward celebrating entrepreneurs support a strong five- to 10-year investing outlook.
- He expects European banks to remain attractive because higher rates can support double-digit ROEs after years of weak post-GFC profitability.
- He likes Japan because wage growth and Tokyo Stock Exchange pressure are pushing companies to focus on ROE and shareholder returns.
- He avoids many loss-making companies and capital-hungry businesses because he worries markets may not stay favorable long enough for them to execute.
- He says family-owned companies can be great investments when the family is optimizing for shareholder wealth rather than fame or control.
Notable quotes
“countries can change. I mean I was a part of a cohort where I was old enough to know what the country was like before India liberalized”
“I think of noise in two ways. One is at a point in time when I'm looking at a company, there might be 15 factors and I boil it down to here are one or two that really matter”
“family-owned companies can be great investment opportunities, both in emerging markets and in the developed markets, if you can get a good read of what the family is trying to optimize for”
How the episode opens
- I've heard you talk about you're not just investing in the companies, but you're investing in the countries. - There are some businesses that are inherently local. So retail banking, for example.
You're investing in the country's growth prospects because the company is based there. You're also investing in the rules and legal infrastructure of that country. What the society values and expects from the companies is different.
Therefore, where a company is domiciled does actually matter. - Share with us a lesson you've learned. - I actually think one of the key things in our business is never to...
- Today, we're joined by Samir Parekh. Samir is a portfolio manager based in London. He's been at Capital Group for 18 years.
Super happy to have you on, Samir. Thank you for joining. - Thanks for having me, Mike.
I'm excited. - London is my favorite city in the world. Tell me a little bit about why you like London.
- Well, it's been home for us for 25 years. Our kids are born there. They think of themselves as British.
So they're pretty much, "London is home. But in particular, I think for me what stands out in London, it really is a cosmopolitan city. So you could be from anywhere and still feel like London belongs to you.
You're not forced to become English or British. And that makes it a very exciting city for me. And then I love watching cricket and you get that in London.
So that helps. - Good. You got involved in this business and a lot of folks who were involved in it, it's something had to do with their parents and your father was an accountant.
So talk a little bit about how that worked and how that got you involved in the investing business.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- india emerging markets
- free enterprise
- family-owned companies
- currency risk
- banking and shareholder value
Watch the episode
Watch “Investing in South Asia's emerging markets: India’s embrace of free enterprise” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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