Foreign investors ditch China to start $9 billion stock buying frenzy in India

[NG Missile Vessels]

Unimpressed with the post-Covid growth story of China, foreign institutional investors (FIIs) have been jumping ships resulting in a $9 billion catalyst to Indian stocks in the first quarter of FY24.

With daily average buying totalling around Rs 1,400 crore, foreigners have not only been the biggest buyers of Indian equities so far this financial year but have also taken over as Dalal Street's Mr Consistent. NSDL records show that FIIs have been net sellers only on 8 days out of 51 trading sessions in FY24.

On the other hand, domestic institutional investors (DIIs) have bought stocks only worth about Rs 6,500 crore during the period against FII buying of about Rs 72,000 crore in INR terms.

With Nifty rallying 8.5% in June quarter to near all-time peak levels, insiders say China's loss is India's gain as Chinese economic rebound seen earlier this year lost momentum in the second quarter.

"The post-lockdown recovery in China turned out to be a temporary one and the resultant equity flows to Chinese markets at the beginning of the year have also normalised," said Rahul Singh, CIO of Tata Mutual Fund.

India, according to him, is in a sweet spot now because if growth remains cyclically depressed in developed economies and structurally subdued in China, India's growth premium can sustain.

"Nifty50 premium to emerging markets has expanded from 45-50% to the 60-70% range. Moreover, there is very little on the horizon which can challenge this narrative with crude/energy prices and any shocks in domestic politics being the key risks," he said.

Foreign brokerage firm Jefferies' Chris Wood had last week said global investors, as opposed to dedicated emerging market investors, do not want to invest in China stocks.

"India remains greed & fear’s favorite stock market on a ten-year view which is why global investors, and not just Asian and emerging market specialists, should be invested in it, most particularly given the undeniable question marks surrounding the long-term direction of China," he wrote in his weekly newsletter.

Refinitiv data shows foreign investors sold $1.71 billion worth of mainland shares in China during May after selling $659 million in April.

Not just India, markets in Japan and South Korea have also benefited from the fizzling out of the China re-opening theme. Japan's Nikkei is up 30% this calendar year and South Korea's Kospi 17.5%.

Despite the recent recovery in Chinese shares on rate cut by its central bank, analysts think that there is a high probability that FII inflows will sustain on Dalal Street in the near term.

"The primary reason is that whilst developed economies have been debating on the impending recession and how long it will last, India’s GDP growth is touching 6%. This in itself shows our resilience as an economy," said Umesh Kumar Mehta, CIO, SAMCO Mutual Fund.

The March quarter earnings season has also left more bulls than bears on Dalal Street.

Global brokerage firm Nomura has given a target of 19,872 for Nifty by March-end while Goldman Sachs sees the index at 20,000.

Nifty earnings growth are projected by consensus to increase by 20% YoY in FY24, which, Jefferies said, appears high on a head-line basis

"For FY24, partly on a higher base in financials, domestic earnings growth is expected to slow down to 19%. Meanwhile, foreign related earnings should rise 21% YoY, with a rebound in metals, oil and gas being key drivers," it said.

Nifty is now trading on a 12-month forward P/E of 19x, which is above the upper end of one standard deviation band on a long-term basis.

Will China bounce back?
Even as China’s economy is burdened with structural challenges and geopolitical headwinds, and that its growth will likely slow over the medium term, analysts say it will remain an economic juggernaut by size, contributing over one-quarter of global growth.

HSBC Global Private Banking has identified China's recovery opportunities as one of the top four investment themes.

"Taking into account that the most significant incremental impact from China’s reopening has already played out in the past six months, we have repositioned our theme on Asia’s Reopening Winners into a new High Conviction Theme on China’s Recovery Opportunities," said James Cheo of HSBC.

It has maintained an overweight position on mainland China, Hong Kong, India and Indonesia within Asia ex-Japan equities. In the second half of 2023, HSBC believes that Asia will deliver strong market performance and cyclical momentum

Foreign investors ditch China to start $9 billion stock buying frenzy in India

Foreign institutional investors (FIIs) are investing heavily in Indian stocks in the first quarter of FY24, with daily average buying totaling around Rs 1,400 crore. Domestic institutional investors (DIIs) have bought stocks worth only about Rs 6,500 crore in the same period. Experts suggest...

www.google.com

 

[Skull and Bones]

Someone who bought Chinese stock index at the peak of 2007 market crash bubble, has a negative 50% return even after 16 years.

 

[epebble]

Someone who bought Chinese stock index at the peak of 2007 market crash bubble, has a negative 50% return even after 16 years.

Surprising. It is true. But China economy looks healthy. Lots of exports, trade surpluses with the rest of the world, enough money to buy all the military stuff. I am wondering if the stock market is rigged and is basically insiders scooping up from Joe Shmoe.

 

[Skull and Bones]

Surprising. It is true. But China economy looks healthy. Lots of exports, trade surpluses with the rest of the world, enough money to buy all the military stuff. I am wondering if the stock market is rigged and is basically insiders scooping up from Joe Shmoe.

View attachment 935176

A publicly traded company is subjected to a lot more scrutinization of its funding and balance sheet, so much of the economic activity in China happened through privately owned companies, and their preferred method of fund raising has been lower interest debts.

Now after all these years, with increasing debt defaulters, we can see how deep the rot is in their balance sheet. I’d say, don’t touch Chinese stocks with a 10 ft long pole.

 

[MH.Yang]

Surprising. It is true. But China economy looks healthy. Lots of exports, trade surpluses with the rest of the world, enough money to buy all the military stuff. I am wondering if the stock market is rigged and is basically insiders scooping up from Joe Shmoe.

View attachment 935176

The main economic entity in China is state-owned enterprises. Most state-owned enterprises are 100% controlled by the Chinese govt and do not enter the stock market.

Secondly, powerful private enterprises such as Alibaba will choose to go public in Hong Kong, Macau, and the USA.

So, the rise and fall of China's stock market is meaningless.

 

[epebble]

So, the rise and fall of China's stock market is meaningless.

That is a drastic comment. What about all the millions of apartment builders, furnishers, transporters, electronic and other product manufacturers, food industry, medical products etc., (What we call small and medium business in U.S.) They can't be all state run or domiciled abroad. Where do most middle-class Chinese invest their money if not in China based stocks?

 

[MH.Yang]

That is a drastic comment. What about all the millions of apartment builders, furnishers, transporters, electronic and other product manufacturers, food industry, medical products etc., (What we call small and medium business in U.S.) They can't be all state run or domiciled abroad. Where do most middle-class Chinese invest their money if not in China based stocks?

Most of them are also state-owned enterprises. China's state-owned enterprises account for 57% of all enterprise assets. In fact, China's economic structure is more like that of Nordic countries and Singapore. China is not like the USA (some media claim that China is more capitalist than the USA), nor is it like North Korea.

In addition to paying normal taxes, Chinese state-owned enterprises also need to pay 5%-15% of their profits to the government. In 2022, Chinese state-owned enterprises submitted profits exceeding 4 trillion CNY, or 600 billion US dollars, to the govt.

Chinese people are generally unwilling to invest in the stock market. Normal people cannot make money from China's stock market, and the govt also hates the hot money that enters the stock market. Chinese economists believe that hot money is an unstable factor. Chinese people like to purchase real estate or wealth management products provided by banks.

 

[epebble]

wealth management products provided by banks.

What are these? Are they some sort of Term (Fixed) deposits or bond (debt) funds?

 

[MH.Yang]

What are these? Are they some sort of Term (Fixed) deposits or bond (debt) funds?

Banks sell many kinds of financial products, such as annuity insurance, treasury bond, treasury bond reverse repurchase, monetary funds, hedge funds, Bond fund, foreign Stock fund, futures, local bonds, corporate bonds, and so on.

Many high-quality enterprises in China do not like to absorb funds from the stock market, such as Huawei. High quality private enterprises like Huawei are also unwilling to go public and prefer to raise funds through banks, which is more stable and secure.



BTW: The economic structure of China is designed to be very different from that of Western countries. If you use Western analytical methods to analyze China's economy, you will definitely come up with many contradictory answers.

 

[CIA Mole]

Banks sell many kinds of financial products, such as annuity insurance, treasury bond, treasury bond reverse repurchase, monetary funds, hedge funds, Bond fund, foreign Stock fund, futures, local bonds, corporate bonds, and so on.

Many high-quality enterprises in China do not like to absorb funds from the stock market, such as Huawei. High quality private enterprises like Huawei are also unwilling to go public and prefer to raise funds through banks, which is more stable and secure.



BTW: The economic structure of China is designed to be very different from that of Western countries. If you use Western analytical methods to analyze China's economy, you will definitely come up with many contradictory answers.

then explain how to analyze chinese economy the correct way

explain which as aspects of the economy that a westerner cannot understand


literally all the modern technology, science, commie/capitalist ideology in china comes from the west other than the slave mentality there

maybe the key we misunderstand china is we're not familiar with the slave mentality

Nearly 400 million people are under covid lockdown in China

About 373 million people in 45 Chinese cities are under some form of lockdown—a population larger than the entire US and nearly the size of the EU.

qz.com

no one in the west could understand how your people can withstand this amount of oppression

same with the north koreans

 

[GreatHanWarrior]

then explain how to analyze chinese economy the correct way

explain which as aspects of the economy that a westerner cannot understand


literally all the modern technology, science, commie/capitalist ideology in china comes from the west other than the slave mentality there

maybe the key we misunderstand china is we're not familiar with the slave mentality

Nearly 400 million people are under covid lockdown in China

About 373 million people in 45 Chinese cities are under some form of lockdown—a population larger than the entire US and nearly the size of the EU.

qz.com

no one in the west could understand how your people can withstand this amount of oppression

same with the north koreans

But your American dads knelt down to Xi. your American dads begging Xi to save US.