(News Bulletin 247) – According to Bloomberg, all the various stocks listed in India reached a valuation of 4,330 billion dollars at Monday’s close, compared to 4,290 billion for those on the Hong Kong Stock Exchange.

India is the large emerging market that is on the rise. The Nifty 50, an index which brings together the 50 largest capitalizations in the country, gained 20% in 2023, which allowed it to record an eighth consecutive year in the green.

India benefits from a still favorable economic situation with a vigorous demographic, the country having become the first in the world in terms of population at the beginning of 2023. “India is lagging behind in development and its growth rate is high, expected at 6 .5% in 2024”, underlined Eric Bertrand, Deputy Managing Director of Ofi Invest.

“The Indian equity market is traditionally considered a defensive market within emerging markets, due to its less cyclical asset mix compared to China or other Asian markets. (…) Corporate governance and transparency have improved compared to other emerging market countries,” explains Franklin Templeton.

“Indian stocks continue to benefit from household flows, as well as the lack of liquid alternatives in Asia, given negative foreign investor sentiment towards China and concerns over global cyclical indices Taiwan and Korea,” noted UBS in November.

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The plunge of Hong Kong and China

India’s progress is such that, despite a slight slump at the start of 2024 – the Nifty 50 fell by 0.5% – the country has just overtaken Hong Kong in terms of market capitalization. At Monday’s close, all stocks listed on the Indian market were worth $4.33 trillion compared to $4.29 trillion for those on the Hong Kong Stock Exchange, according to Bloomberg data.

India thus becomes the fourth largest stock market in the world, behind the United States (more than 50,000 billion dollars according to companiesmarketcap.com), continental China (5,600 billion dollars) and Japan (4,600 billion dollars).

This change in the ranking is mainly explained in recent weeks by the atrocious dynamics in Hong Kong. The Hang Seng, the benchmark index for the Asian market, has lost nearly 10% since the start of the year (and 30.4% over one year). This Tuesday, it recorded an increase of 2.6%, its best performance since the start of the year. But out of sixteen sessions in 2024, the Hong Kong index has only seen three in the green…

“Given the expected recession in the United States and the slowdown in growth in mainland China, uncertainties may remain for the Hong Kong economy in the short term,” judged the bank UBS in November.

Hong Kong suffers especially from the ambient pessimism hitting Chinese stocks, the CSI 300, an index which brings together the largest capitalizations in Shenzhen and Shanghai, itself losing 6% since the start of the year (and 23% over one year). .

A rescue plan?

A set of elements has stunned investors about China, with growth at its lowest since 1990 (5.2% in 2023), endless difficulties in the real estate market, an important source of wealth for households, but also an increasingly significant state interventionism. Again in December, the Chinese authorities shook up listed groups in the video games sector, including the juggernaut Tencent, via a bill aimed at reducing the time spent and money spent in online games.

According to Bloomberg, the Chinese authorities are considering taking measures worth $278 billion to support their financial markets, via a stabilization fund which would buy shares via the Hong Kong market.

“The question of the sufficiency of support measures arises because foreign investors have fled Chinese markets, scalded by four years of erratic and brutal decisions by Chinese authorities, whether health measures, sudden tightening of regulations, disappearances of business leaders”, points out Alexandre Baradez, head of French market analysis at IG.

“The real estate crisis is not the only explanation for the poor performance of Chinese financial equity markets either, part of the risk aversion of foreign investors for Chinese assets also comes from China’s geopolitical posture, which either its rapprochement with Russia or its desires concerning Taiwan,” he adds.