Historic gap with Indian stocks due to China's $5 trillion rout

Published On: Sunday, October 2, 2022 | By:

Historic gap with Indian stocks due to China's $5 trillion rout

Compared with a 23% slump for the MSCI China Index, the MSCI India Index rallied almost 10% in the just-ended quarter. The 33-percentage point outperformance by the India gauge is the biggest since March 2000. The big divergence between the two stock markets started to take place in February 2021 as tightening liquidity conditions in China contributed to the unwinding of a two-year rally in equities. Indian stocks, meanwhile, kept hitting record highs thanks to an unprecedented retail investing boom.

Beijing’s Covid Zero pursuit, regulatory crackdowns and tensions with the West have led to a $5 trillion rout in Chinese stocks since early 2021. And India -- long dubbed the “next China” -- has become an attractive alternative with economic growth that’s forecast to be the fastest in Asia.

Many market veterans have allocated a higher weight to India than China since the start of this year. Some finacial experts say some of its emerging-market funds have India as their largest holding. M&G Investments (Singapore) Pte has made a “greater allocation” to India in 2022.

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