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India offers investors value for money: Citigroup

South Korea's potential to bounce back faster than other countries from regional economic slowdown and India's software growth offer investors value for their money, Citigroup Asset Management said on Wednesday.

Anthony Muh, Asia regional head of investment, told Reuters the asset management firm was overweight on South Korea and India.

"We are overweight on Korea because it is one of the countries we are expecting to recover sooner than the others," he said.

"As investors we are finding lot of Korean companies which are substantially undervalued and they are showing early signs of growing in terms of earnings growth profile."

India's sustained software boom despite a global meltdown in the hi-tech sector made it attractive to investors, he added.

"Everyone is looking at ways to reduce costs and India has benefited from outsourcing," Anthony said.

Indian software firms have reported increased earnings for the April-June quarter, beating expectations and a slowdown in the United States, its top market.

Last week, Infosys Technologies, India's second largest software exporter, reported a better-than-expected 50 per cent rise in net profit for the April-June quarter.

Citigroup Asset Management said it recently trimmed its weighting on China to neutral from overweight as it was "expensive" from a valuation perspective.

But Anthony said China was the only country in the region, which currently showed positive earnings momentum.

"We are starting to see signs of that in Korea but for the rest of Asia, the earnings momentum is at best flat and in some cases declining," he said.

TELECOMS, BANKING TO LEAD REGIONAL RECOVERY

Anthony, who earlier presented the group's global investment perspective for the third quarter, said the telecommunications and banking sectors would lead the regional recovery next year.

"In China, we are finding some opportunity in the independent power producers sector as well," he said.

Citigroup Asset Management said it was about to upgrade Singapore to neutral from underweight.

"Southeast Asia's economic and political environments remain volatile and generally weak," it said.

"But financial markets have largely discounted these problems and markets look fundamentally cheap on a long term perspective but lack an earnings driver in the short-term," it added.

US TO HAVE "TEA POT" SHAPE RECOVERY

Citigroup said it expected the United States economy to recover in early 2002 and saw limited risk of any inflationary pressure build-up.

"The shape of the recovery will not be a V, U or L. It will look more like a tea pot," Anthony said, suggesting the recovery would not rise as high as a conventional V and would then level out somewhat.

He said US growth should recover to long-term trend levels and that one of the factors holding back the United States economy from attaining the blistering growth rates of the 1990s was a slowdown in capital expenditure, he said.

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