Indian equities have made a strong recovery, in contrast to the sharp decline in Hong Kong stocks, suggesting that the "sell India to buy China" trend may be losing momentum. Samir Arora, founder and CEO of Helios Capital, believes this shift from India to China was only a brief tactical move that won’t gain significant traction. He discussed this view in a recent interview, offering insights into the future of investing in both markets.
The short-lived India-to-China trade
Samir Arora’s remarks come after Indian stocks showed resilience while Hong Kong’s Hang Seng index dropped 11%. The Hang Seng Mainland Properties index also declined by more than 10%. Investors were disappointed after China's National Development and Reform Commission (NHRC) failed to provide details on economic stimulus, leading to scepticism about the country’s recovery plan. Arora stressed that investors don’t need to sell Indian stocks to invest in China. He suggested that fund managers have many other options to source capital for China if needed.
Arora highlighted that investing in Chinese stocks doesn’t have to come at the expense of Indian equities. With other global markets available, investors can diversify without reducing their stakes in India. This reinforces the idea that it remains wise to invest in stocks in India as the country’s market continues to demonstrate strength amid global fluctuations.
China's stimulus plans leave room for cautious optimism
China's failure to deliver on expected stimulus measures left global investors cautious. Hopes were high for more fiscal support, but the Ministry of Finance's absence at a recent press briefing dimmed these expectations. Rong Ren Goh, portfolio manager at Eastspring Investments, noted that without further major announcements, markets are likely to consolidate. Investors had anticipated specific fiscal details to stimulate China's economy, but these could have been more forthcoming, leading to significant market reactions.
Contrasting trends between China and Hong Kong
While Hong Kong stocks faced sharp declines, Mainland China’s markets rebounded strongly after an extended break. The CSI300 blue-chip index surged by 10% during early trading, and the Shanghai Composite index saw its highest level since December 2021. However, these markets also experienced a pullback following NHRC’s unsatisfactory press conference.
Samir Arora noted that this contrasting trend was likely due to Mainland China’s markets catching up after being closed for a week. Meanwhile, Hong Kong’s market realised it had surged too quickly. Arora’s outlook reinforces the idea that investors can continue to invest in stocks in India without shifting focus entirely to China.
Key takeaways
Investors should remain cautious but continue to invest in stocks in resilient markets like India.
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