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Abrdn Plc prefers Chinese and Indian stocks over their Japanese peers in the next three to six months, betting that the right policy moves would help the two emerging markets lure fund inflows. Should “high frequency data points continue to surprise on the upside, and at the same time we’ve seen policies being pushed through, that’s sufficient to drive a re-rating in the equities market in China,” said David Zhou, investment director of multi-asset and investment.
Investors will also return to India once they have “ascertained that policy continuity and reforms are still on track,” even after Prime Minister Narendra Modi’s party lost its parliamentary majority in the recent elections, Zhou said in an interview Tuesday. India’s macro picture and earnings prospects are still supportive, he added.
Choosing the right allocations for Asia’s three biggest economies has become a key determinant of investment returns in the region, as multiple factors spur stronger gains in Indian and Japanese equities this year compared with China’s stock market. In April, a Bloomberg survey showed almost half of the respondents were upbeat about India, thanks to a belief that its economic expansion would boost corporate profits.
A gauge of Chinese shares listed in Hong Kong has risen over 10 per cent this quarter, while India’s Nifty 50 advanced 4.8 per cent. By comparison, the Topix Index has slid 1.3 per cent sincestart of April. abrdn trimmed its conviction level on Japanese equities compared with the start of the year as cyclical tailwinds including a weaker yen are over. “We probably need to see more progress on corporate governance reform before foreign investors are willing to add more meaningfully to Japan,” Zhou said.
On the other hand, China’s third plenum next month may lead to more stimulus measures, which could potentially help the Hang Seng Chinese Enterprises Index climb 20 per cent or more, he said.
Zhou remained cautious over China’s longer term prospects, citing the need for a more sustainable recovery in the country’s property sector and corporate earnings.
For a longer horizon, “I would still stick with India,” with the highest conviction among Asian markets so long as there’s policy continuity, he said.
First Published: Jun 14 2024 | 11:36 PM IST