Leave India behind and buy China! Bank of America's latest survey: Global fund managers are scrambling to pour into the Chinese stock market

The Zhitong Finance App learned that a Bank of America Securities survey showed that after China, the largest economy in Asia, introduced a stimulus plan, global fund managers increased their investment in China at the expense of India's allocation.

On Saturday, China promised a sharp increase in debt to revive the economy. Meanwhile, the central bank announced the most aggressive monetary support measures since the pandemic in September.

Bank of America Securities said in a Tuesday report: “Growth expectations for China have revived after the policy shift.”

“(Survey) participants thought this time was different because they gave up looking for opportunities elsewhere and turned their sights on China.”

The Bank of America survey shows that they are refocusing on China at the cost of reducing their allocation to the Indian stock market.

As of October, foreign investors have withdrawn nearly $8 billion from the Indian stock market. This will be the biggest outflow of capital since the peak of the pandemic fears in March 2020.

In August of this year, compared to fund managers who reduced their holdings, a large number of fund managers increased their holdings in Indian stocks. And according to the latest investigation, they have now changed their position. However, the survey did not specify whether they have switched to reducing their holdings or remaining neutral on Indian stocks.

At a time when attitudes towards China are changing, analysts are also reminding investors to pay attention to the overvaluation of the Indian stock market. Against the backdrop of foreign capital outflows, the Indian stock market has been stagnating.

Currently, India's benchmark Nifty 50 index is down about 5% from the record high set in the last week of September.

Meanwhile, China's major stock indexes climbed to their highest point in more than two years last week.

Tridep Bhattacharya, president of Edelweiss Asset Management and chief stock investment officer, said: “In terms of valuation, the Chinese market has become quite attractive. Coupled with expectations of stimulus plans, it has attracted capital.”

According to Bank of America data, the 12-month forward price-earnings ratio of the Indian stock market is 24 times, which is about 23% higher than the average of the past 10 years. China is 10.7 times, about 7% below the long-term average.