Hong Kong family offices turn attention to India, following global trend towards ‘prime destination for investment’

As China grapples with economic challenges, a growing number of Hong Kong family offices are following the global trend of diversifying their investments by turning their attention to India.

Their decisions come as analysts and global investors consider India a promising growth story in Asia, with expectations of significant economic expansion in the coming years and an influx of capital into equities and fixed income.

“We have been very optimistic about India’s potential and view it as an additional strategic market alongside China,” said William Chow, deputy group CEO of Hong Kong-based multi-family office Raffles Family Office. “We believe that India is a prime destination for investment. We adopt a dynamic investment approach whereby currently the firm has around 10 to 15 per cent of Indian exposure in our portfolio through stocks and [exchange traded funds].”

India’s stock market capitalisation surpassed Hong Kong’s for the first time on January 23, reaching US$4.33 trillion compared with Hong Kong’s US$4.29 trillion, making it the fourth-largest stock market in the world.

Despite a short-term consolidation following a rally, analysts anticipate a positive outlook on the back of the country’s strong economy.

Global rating agency Moody’s recently raised India’s GDP growth projection for 2024 to 6.8 per cent from 6.1 per cent after the country reported stronger-than-expected data in 2023. Led by strong manufacturing and construction activity, India’s GDP posted 8.4 per cent growth in the quarter ended December.

Another ratings agency, S&P Global Ratings, predicts India, currently the world’s fifth-largest economy, will overtake Japan and Germany to become the third-largest economy by 2030.

Kalpen Parekh, CEO of India-based DSP Mutual Fund, has observed growing investment interest from Hong Kong investors. During a recent visit to Hong Kong, he had 18 to 20 meetings with local family offices and wealth-management companies with clients who are looking to invest in India.

“Our dialogues keep going on,” he said. “So at some point in time, we will be able to manage money for them.”

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DSP Mutual is a fund firm backed by DSP Group, one of India’s oldest financial services firms, which began as a stock brokerage in the 1860s.

However, investing in India’s stock market presents some challenges, said Marcus Wong, vice-chairman of Hong Kong-based family office WRise Wealth Management.

It can be difficult to value Indian companies using traditional methods, as the market has different metrics, Wong said.

While equities pose challenges, clients are also exploring investment opportunities in commercial properties due to India’s booming economy, Wong said.

Investors “really have to dig deep” during the due diligence process, “not only on the numbers and the business itself, but also you have to get to know the culture and religion as well” because these are influential factors in India, he said.

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Parekh of DSP Group said India is “democratic and meritocratic”, and long-term shareholders have been rewarded.

“Indian companies and entrepreneurs have delivered 12 per cent profit growth rates over three decades,” he said. “India is the next big domestic demand story for the next 25 to 30 years.”

Christopher Wood, global head of equity strategy at Jefferies, who is also optimistic about the Indian market, has highlighted the potential growth of the Indian real estate sector due to pent-up demand.