As investors flock to emerging markets, Chinese and Indian stock markets may be the standout performers in Asia for the second half of the year.
Recently, media interviewed 19 Asian strategists and fund managers to gauge their views on the Asian market for the second half of the year. The survey results showed that about one-third of the respondents predicted that the Chinese stock market would perform the best in the second half of the year, while another one-third or so believed that the Indian stock market had the most potential. In contrast, the Japanese stock market ranked third in terms of support, but it was far behind China and India.
The Federal Reserve's interest rate cut is seen as a common positive factor for the Chinese and Indian markets, but investors favor these two markets for their unique reasons. The survey indicated that investors are optimistic about the Chinese stock market mainly due to the current low valuations, coupled with expectations of new supportive policies; while the preference for the Indian stock market stems from the generally optimistic market sentiment following the elections.
Joseph Little, Global Chief Strategist at HSBC Asset Management, wrote in his mid-year outlook:
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"We believe that low valuations and an acceleration in global economic expansion provide opportunities for emerging markets, especially Asian markets, to lead in the second half of the year."
In the last quarter, the performance of the MSCI Emerging Markets Asia Index outperformed the broader MSCI Asia Index, recording the largest increase since 2009. Goldman Sachs data shows that Asian emerging markets were also the markets with the most nominal net purchases in June, while the global stock net selling pace was the fastest in two years.
In the Chinese stock market, some key indicators have entered a technical correction. However, media surveys show that analysts and fund managers are optimistic about the Chinese stock market for the next six months, as global capital returns and corporate earnings improve.
HSBC expressed optimism about the Chinese market, with its Asian equity strategist Herald van der Linde stating that the negative sentiment in the Chinese stock market will gradually improve. Given that "economic activity in China is slowly improving," HSBC is increasing its holdings for the second half of the year.On the Indian front, although Modi's ruling coalition failed to secure an absolute majority in the parliament, it still emerged victorious in the general elections. In June, following Modi's commitment to policy continuity, foreign investors returned to the Indian stock market, propelling its total market capitalization to surpass $5 trillion for the first time.
Another survey regarding India indicates that due to investors' confidence in corporate profit growth, the upcoming federal budget may further stimulate areas such as consumer spending and infrastructure, potentially accelerating the growth of the Indian stock market before the end of the year.
Additionally, more than half of the respondents expressed that by the end of 2024, Asian stock markets may outperform the U.S. stock market, citing reasons such as the Federal Reserve's interest rate cuts and the lower valuations in Asian markets. However, the majority believe that the increase will be capped at 10% or lower.