Vantage | Why investors are dumping China and moving to India

Just like investors in the stock market, there are two kinds of leaders: bulls and bears, and what would you call Xi Jinping? If you ask him, he’ll probably say he’s a bull—someone who can drive the Chinese economy to new heights. But his limitations remain exposed. There is panic in Beijing as investors are fleeing the country. They are dumping Chinese stocks. The loss is seven trillion dollars in less than three years. Last week, there was a sell-off of almost $2 trillion in value. The problem is too big to ignore, and President Xi has finally decided to step in. He called for a meeting with Chinese regulators to find a way to improve global sentiment. About China and its worsening economy. The meeting was supposed to take place on Tuesday. So far, we’ve not heard about the outcome. No big announcements yet. Earlier Tuesday, the news of the impending meeting lifted Chinese markets. But it hasn’t impressed major investors. They seem to have run out of patience, and they’re moving their money to India. We are talking about billions of dollars in investment. In Indian stocks, Wall Street banks are placing bigger bets. There is a gold rush. This shift is hard to miss. Investors prefer India over China because India has consistently proven to be the driver of growth. Meanwhile, China has developed a serious perception problem. It is no longer seen as an investor-friendly destination. Not just for foreign investors but also for locals—they are unhappy. Many of them are venting on Weibo, which is one of China’s biggest social media platforms. Chinese users looked for the account of the US Embassy in Beijing and started posting comments to it. These comments are basically criticism. They are slamming China’s economic policies. But why is it on the US Embassy page? It’s a way to escape Chinese censors—a trick that these people have devised. When you post on social media, censors pick it up. But when you comment on someone else’s post, there’s a lesser chance of discovery. It’s a relatively safer space to criticise China. That is why they go to the US Embassy account on Weibo. It’s being flooded with comments. On one particular post, there were over 100 thousand comments, like “could you spare us some missiles to bomb away the Shanghai stock exchange?”. The Weibo account of the US Embassy in China has become the “wailing wall of Chinese retail equity investors".

The original post was about wildlife conservation, but the comments section was filled with criticisms of the Chinese economy. These comments are revealing. They show that a large number of Chinese citizens are unhappy with the meltdown in the markets. For six straight months now, investors have been selling Chinese stocks in large numbers. Last month alone, global funds sold Chinese stocks worth two billion dollars, and they’ve not seen the worst yet. Experts say China’s equity market is yet to hit the bottom. An assessment from Nomura, which is Japan’s largest investment bank, shows China’s economic dip is “ongoing and is likely to worsen”. The basis of this assessment is China’s weakening economy. It faces multiple challenges, from a failing property sector to a contracting manufacturing sector. Last month, factory output declined for the fourth straight month. The manufacturing activity of large and state-owned companies contracted for the fourth straight month in January. Manufacturing is clearly slowing down; China’s official data for a change shows the real picture that the sector is shrinking. Joining all of these dots, it is easy to see why China is being called “uninvestable”. So investors are looking for alternatives, and they’re narrowing down on India. Wall Street giants like Goldman Sachs Group Inc. and Morgan Stanley are endorsing the South Asian nation as the prime investment destination for the next decade. Two Wall Street banks have endorsed India: the Goldman Sachs Group and Morgan Stanley. They have projections for the next decade. They say India is the prime investment destination. The numbers support their assessment. Last year, the Indian stock market received some 20 billion dollars from foreign investors. The momentum is clearly on India’s side. Experts say Indian stocks are now overpriced. They are among the most expensive in the world. The gauge trades at more than 20 times future earnings, 27 percent more expensive than the average for the 2010–2020 period. The shares of the top Indian companies are 27 percent more expensive when compared with the average prices from 2010 to 2020. So, one can expect a price correction. But the larger picture looks like this: more people are buying into India’s growth story. The world is betting on India’s rise, and the overall trajectory remains positive. Talking about China, it has its task cut out; short-term measures and assurances won’t be enough. It needs concerted action to win back investors and reverse its decline, and the onus is squarely on Xi Jinping.  Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the  Latest News,  Trending News,  Cricket News,  Bollywood News, India News and  Entertainment News here. Follow us on  Facebook,  Twitter and  Instagram.