Bullish on emerging markets: Chinese, Indian stocks may outshine Japan in the second half
- A third of 19 Asia strategists favour Chinese stocks, while a third favour Indian equities over Japan during the next 6 months, according to a Bloomberg survey
Equities in China and India are being touted as potential outperformers in Asia in the second half of the year as investors flock to emerging-market themes.
About a third of 19 Asia-based strategists and fund managers surveyed informally by Bloomberg News said they see Chinese stocks outstripping most over the next six months. A similar number picked India as their top bet while Japan was a distant third.
Anticipated Federal Reserve interest-rate cuts are seen acting as tailwinds for the two emerging markets, each of which offers its own unique narratives, too. Survey respondents preferred Chinese stocks for their low valuations and expected policy changes, while favouring Indian shares for their post-election optimism and relative immunity to geopolitical tensions.
“We believe valuation discounts and broadening global growth present an opportunity for EMs, particularly in Asia, to lead in the second half of the year,” Joseph Little, global chief strategist at HSBC Asset Management, wrote in his midyear outlook.
EM stocks in the region are already on a roll. The MSCI EM Asia Index outperformed the broader MSCI Asia gauge by the most since 2009 in the last quarter. EM Asia was also the most notionally net bought region in June, according to Goldman Sachs Inc.’s prime brokerage desk – while global equities were net sold at the fastest pace in two years.
Indian equities have extended their rally since Prime Minister Narendra Modi’s ruling party secured sufficient support from key allies to form a coalition government, giving the leader a third straight term in power. The nation’s stock-market value exceeded US$5 trillion for the first time in June as Modi committed to policy continuity and foreign investors returned to the market after two months.
A separate Bloomberg survey about India showed that the rally in the country’s equities has the potential to accelerate into year-end as investors remain confident of corporate profit growth and the coming federal budget may provide a further boost for areas such as consumer spending and infrastructure.
