BlackRock downgrades Chinese stocks, emerging-market stocks to neutral: Report

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Covid-19 pandemic. Its property market is in deep distress with default risks. Even though the government has announced several stimulus measures in the last few months, they have not been able to instil optimism in the economy.

The public debt of the world's second-largest economy has been mounting, its exports are slowing and it has to deal with geopolitical issues too. China's economic outlook is bleak. China's Shanghai Composite Index is flat for the year while Hang Seng is down about 11 per cent year-to-date.

Experts believe the bleak outlook of the Chinese market may make foreign institutional investors (FIIs) move out of it and increase their focus on other emerging markets (EMs), including India. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services pointed out that the Shanghai Composite Index is the worst-performing large market if we take the near-term and the long-term views. "The index is flat not only for the year but for the last 16-year period also.

Shanghai composite is now at 3,126, the same level as in March 2007. This is terrible long-term performance," said Vijayakumar. He said the disappointment with China is only increasing and this could perhaps be good for India.

Vijayakumar underscored that with a declining population, a decelerating economy, political tensions with the West and anti-business economic policies, the prospects of the Chinese market look dim. That’s why FPIs are following an ‘avoid China’ policy. "This is certainly good for India," said Vijayakumar.