Published:
February 18, 2009
The
correct answer is
(B.)
BankingOne of the
first industries to develop in any
fast-growing emerging market is
banking and financial services. As
consumers obtain good-paying jobs
and build their disposable incomes,
they need somewhere to keep their
money. Banks are needed to handle
basic deposits and bill payments.
And as disposable income builds
further, consumers can begin to
afford credit, including mortgages
to buy a home or loans to purchase
automobiles. Finally, as a nation's
population amasses savings, demand
for other financial services such as
investment management, savings
products and insurance also goes
into overdrive.
This is exactly what's happened in
India. Mortgages were almost unheard
of in India 15 years ago but since
2000 have been growing at an
annualized pace of more than +30%.
And there's plenty of potential for
more growth -- the ratio of total
home loans to India's gross domestic
product currently stands at around
8% up from around 3% at the
beginning of the decade. In the
U.S., this ratio is over 70%.
That's why Indian banking stocks
could be the next big thing. For
example, HDFC Bank (NYSE: HDB) is
India's third-largest bank, with
more than 1,400 branches located
around India and over 15 million
customers. Loans to corporations
account for about 40% of the loan
book; the remaining 60% is retail
lending. With an outstanding retail
branch network, plenty of synergies
as it integrates its recent
acquisition of Centurion Bank of
Punjab, and a conservative loan
position, HDFC Bank should be able
to sustain growth rates close to
+30% in coming years despite the
global economic slowdown. Yet, due
to weakness in the broader Indian
markets, the stock trades at a huge
discount to that growth rate.
With these points in mind,
StreetAuthority editor-in-chief Paul
Tracy believes it's an excellent
time to take advantage of the
market's short-term weakness and buy
into the Indian growth story. HDFC
is just one of a dozen Indian
companies that present unheard of
opportunities in this bear market.
With P/Es as low as 3.0 and
double-digit projected EPS growth,
investors would be crazy not to
check out the latest issue of Paul's
Market Advisor newsletter, where
Paul offers an in-depth analysis of
today's Indian market and profiles
several of his favorites. To learn
the names of these stocks, and to
learn more about Market Advisor,
please visit this link.
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