StockMarketBoardNews about a slowdown in India has rocked the Asian markets. The world’s tenth largest economy only grew at a rate of 4.4% between April and June. The performance was not only worse than the 4.8% growth in the first three months of the year but it was also less than most economists had expected.

The slowdown was blamed on a contraction in the mining sector and shrinkage in the manufacturing sector. Worse still, the fall in the rate of Indian’s economic growth has also hit the rupee, which has lost almost a fifth of its value this year.

The fall in the rupee is likely to boost inflation since India has to import both fuel and food. Consequently, the drop in the value of the rupee is likely to make those imports more expensive for India’s consumers.

An economic slowdown coupled with a falling currency is not the kind of environment that is likely to attract investors. And when you throw into the mix a government that could find it hard to raise interest rates to defend its currency, you are unlikely to find investors beating a path to Indian-quoted companies.

The same cannot be said of Singapore, which is still enjoying modest economic growth, a stable currency and relatively inexpensive shares to boot. Currently, the Straits Times Index (SGX: ^STI) is valued at around 13 times earnings, which does not look too demanding. By comparison, India’s Sensex and Malaysia’s FTSE Bursa Malaysia is valued at 16 times earnings. Meanwhile, Indonesia’s Jakarta Composite Index is valued at nearly 18 times earnings.

Singapore’s market has, unquestionably, been affected by the rapid withdrawal of funds from Asia markets. But that has probably got more to do with a lack of understanding of Asia rather than a fundamental problem with Singapore shares. But we can turn their weakness into our strength.

As investors with a better understanding of local shares, we can turn adversity into opportunity. So spend some time looking through the market for shares that you believe have been oversold because easily-panicked investors have a terrible habit of throwing the baby out with the bathwater.

India’s tales of woes could be our pearls of delight. But that really depends on whether you have the courage to buy when others are fearful

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.


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