In the latest “GREED & Fear” report, Wood disclosed that HDFC Bank has been removed from both his Asia ex-Japan and global long-only equity portfolios, with the proceeds redeployed into HSBC, even as he pares back India and Australia to add to Taiwan. “An investment in HSBC will also be introduced with a 4% weighting by removing the investment in HDFC Bank,” he wrote on the changes to the China and Asia long-only portfolios, adding that a similar switch is being made in the global and international mandates.
What happened at HDFC Bank?
While Wood has not given a rationale for the trigger behind his exit, Chakraborty’s resignation letter last week has left investors worried, as he cited “certain happenings and practices within the bank” that he said were “not in congruence” with his personal values and ethics.The letter triggered an 8.7% slide in HDFC Bank shares the following day and wiped $16.3 billion in market value over three sessions.
Since then, markets regulator Sebi has also begun a preliminary review of the claims made in the resignation letter and whether other directors were aware of any material information and did not document it, according to a report by Reuters.
The Reserve Bank of India, the primary regulator in the case, said last week it had found “no material concerns on record as regards its (bank’s) conduct or governance”.
Earlier this week, the Financial Times reported that a power struggle between chairman Atanu Chakraborty and CEO Sashidhar Jagdishan triggered the former’s abrupt resignation. The tensions, which had been simmering for months, centred on strategic disagreements, governance issues and the CEO’s impending reappointment, the FT reported, citing people familiar with the matter.
According to the FT report, the underlying dispute went beyond compliance issues, with insiders pointing to a deeper clash over leadership style, strategy and control. The friction appears to have peaked over the proposed renewal of Jagdishan’s tenure, which is subject to regulatory approval.
HDFC Bank said on Tuesday it had appointed external law firms to independently assess the concerns raised in the resignation letter.
Also Read | HDFC Bank chairman Atanu Chakraborty quit due to ‘power struggle’ with CEO Sashidhar Jagdishan: Report
What else Chris Wood said
In the meantime, Wood has also reduced India weight by 2 percentage points in his Asia Pacific ex-Japan relative return portfolio, versus a 12.5% index weight, even as Taiwan’s underweight is narrowed by four percentage points.
“The weighting in Australia and India will be reduced by two percentage points each, while the weighting in Taiwan will be increased by four percentage points to a smaller underweight,” the report notes, underscoring a tactical shift towards North Asian exporters and financials leveraged to a weaker yen and resilient US growth.
Wood, a long-time India bull, is not turning structurally bearish on the market but is clearly signalling a preference for what he sees as cleaner stories in global and Asian banks at this stage of the cycle.
On Thursday, Goldman Sachs downgraded its stance on the Indian market to “marketweight”, cutting its Nifty target to 25,900 and warning that an “energy shock led” earnings downgrade cycle is about to unfold.
Earlier this week, Bernstein had also reduced the Nifty’s year-end target to 26,000 and flagged the risk of the headline index falling to as low as 19,000 in the worst-case scenario.
Also Read | Goldman downgrades India, slashes Nifty target and warns of earnings cut. Here’s why
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