China’s zero-Covid pursuit has seen stocks plunge US$5 trillion since 2021, benefiting India
- Beijing’s zero-Covid pursuit, regulatory crackdowns and tensions with the West have led to a US$5 trillion rout in Chinese stocks since early 2021
- Indian stocks, meanwhile, have kept hitting record highs thanks to an unprecedented retail investing boom
The relentless plunge in China’s stocks has burnished the appeal of their biggest emerging-market rival India, spurring a divergence that is rarely been seen before.
The MSCI India Index rallied almost 10 per cent in the just-ended quarter, compared with a 23 per cent slump for the MSCI China Index. The 33-percentage point outperformance by the India gauge is the largest since March 2000.
Beijing’s zero-Covid pursuit, regulatory crackdowns and tensions with the West have led to a US$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 is forecast to be the fastest in Asia.
Market veteran Mark Mobius has allocated a higher weight to India than China since the start of this year. Jupiter Asset Management says 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.
India’s expanding domestic market means the country can weather a looming global recession better than most other emerging markets, money managers say. In the longer term, China’s decoupling with the US may also pave the way for Indian firms to boost their presence worldwide.
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China’s “draconian lockdowns continue to impact these supply chains, so the clamour for an alternative has been rapidly gaining favour,” said Nick Payne, a London-based investment manager for global emerging-market equities at Jupiter. “India is the key candidate to fill that role, in an approach that is been dubbed China+1.”