Three groups of countries are in the race to get out of the global recession: European countries like Greek and Spain are left behind, still fighting with their debt crisis. The United States, Canada and Australia are recovering and moving in the right direction. And emerging economies like India and China are front-runners.
Although China is still the leader, betting on India is probably a better idea for investors, partly because China started to raise minimum wages. This might raise production costs.
“Investors should sell shares of Chinese cement and metal companies as increases in labor costs will curb capital spending in those industries,” Bloomberg Businessweek reported.
On the other hand, India’s manufacturing sector is growing at its fastest speed in 27 months. The HSBC India Manufacturing Purchasing Managers’ Index reached 59 in May, up 1.8 points from April’s 57.2.
“Production at Indian manufacturers rose sharply and for the fourteenth consecutive month in May. Reports indicated that activity levels were raised in response to further gains in new business,” a press release said. “Outstanding business accumulated at an accelerated pace during the latest survey period.”
Manufacturing companies’ such as AIA Engineering Ltd. stocks have been moving up during a one-year period. The stock was last traded at $393.45 on Tuesday. Its 52-week low was $188.90 and 52-week high was $429.90.
Another area that’s worth considering is India’s technology industry. India’s education system has created millions of highly-skilled workers, providing a tremendous boost to the high-tech industry in the country.
“India has the particular advantage of being somewhat advanced in term of its education system,” Torben G. Andersen, a finance professor at Northwestern University, said. “So this sector [has] very well-educated, English-speaking people there.”
“One source of strength is technology,” Adolfo Laurenti, deputy chief economist at Mesirow Financial Holdings Inc. said. “They have a very well-educated workforce. They have some excellence in their education system. So they have some very good schools that are doing research on advanced technology.”
Patni Computer Systems Ltd. is one of the fastest-growing information technology companies in India. Its stock closed at $25.36 on Tuesday. Its 52-week low was $9.88 and 52-week high was $28.33.
But, Laurenti sounds a cautionary note for investors.
“On the negative side, it seems relatively difficult to do business in India,” Laurenti said. “If you look at some of the indicators like how costly it is to open a business, how long it will take to get the authorization that will lead to start a business and the amount of corruption in the system, India is still lacking in those terms.”
“[There is] a lot of bureaucratic red tape. So that does prohibit the amount of investment from happening,” Andersen said.