Investors pivot to former favourite China after a brief bout with Indian stocks amid ‘market froth’ concerns
buy India, sell China" has reached an inflection point for some investors. Lazard Asset Management, Manulife Investment Management and Candriam Belgium NV are paring exposure to India after a record-breaking rally. They’re pivoting to former favourite China, as Beijing’s support for its economy spurs a recovery in industrial profit and manufacturing.
The nascent swing highlights how funds are starting to buy into the narrative that China’s policy support will be enough to revive growth. While major Wall Street banks continue to position India as the key investment destination for the next decade, investors are turning wary amid stretched valuations and regulatory warnings about market froth. “As China has got cheaper and cheaper, some of our Chinese investments have become less valuable but the investment case for them has increased," said James Donald, head of emerging markets at Lazard Asset.
The fund manager’s China portfolios are aligned with the index weight, while India “has been a source of negative attribution for our portfolios" due to its rich valuations, he said. There are signs the shift is gaining traction, even if most see it as a tactical play given the outlook for India’s booming economy and expectations that Prime Minister Narendra Modi will win a third term in elections starting April 19. More than 90% of emerging market funds are adding back their positions in mainland Chinese shares, which were underweight, while also dialling back exposure to India, according to HSBC Holdings Plc.
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