American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Business

CLSA shifts focus from China to India amid Trump’s return and economic challenges

by admin November 16, 2024
November 16, 2024
CLSA shifts focus from China to India amid Trump’s return and economic challenges

Global brokerage CLSA has made a significant pivot in its investment strategy, moving back to Indian equities while reducing exposure to China. .

The reversal marks a significant move for CLSA, which initially increased its allocation to Chinese equities in October 2024 while trimming its overweight position in India from 20% to 10%.

This tactical adjustment aimed to capture perceived signs of recovery in the Chinese market.

However, after reassessing conditions and noting persistent challenges, CLSA has chosen to revert to a heavier India allocation.

It has adjusted its strategy to increase its investment in India by 20%, driven by the growing uncertainty surrounding China’s economic prospects.

China faces ‘misfortune in threes’

CLSA’s report, titled Pouncing Tiger, Prevaricating Dragon, highlights three key setbacks that have pressured Chinese equities.

The re-election of Donald Trump and the reappointment of Robert Lighthizer as US Trade Representative signal a return to protectionist policies, including potential tariffs of up to 60% on Chinese goods.

This development comes as exports play an increasingly pivotal role in China’s economic recovery.

China’s economic difficulties are compounded by sluggish real estate investment, high youth unemployment, and continued deflationary pressures.

Despite the stimulus measures introduced by China’s National People’s Congress, CLSA believes these efforts lack the strength needed for substantial economic recovery.

“The NPC stimulus amounts to de-risking with little reflationary benefit,” the brokerage commented.

Adding to China’s woes are rising US yields and heightened inflation expectations, which restrict the ability of both the US Federal Reserve and China’s central bank, the People’s Bank of China (PBOC), to enact accommodating monetary policies.

CLSA expressed concerns that these dynamics could trigger a pullback by offshore investors who previously invested after the PBOC’s initial stimulus in September.

India: a relative haven amid global uncertainties

In contrast to China’s vulnerabilities, India’s economic landscape presents fewer exposures to international trade tensions and protectionist US policies.

CLSA emphasized India’s relative insulation: “India appears as among the least exposed of regional markets to Trump’s adverse trade policy.”

Despite recent net outflows of ₹1.2 lakh crore from foreign institutional investors (FII) since October, driven by rising inflation and weaker second-quarter earnings, domestic investment appetite in India has remained resilient.

This robust local demand helps counterbalance external pressures and positions India as an attractive option for global investors seeking stability.

China’s valuations are not so attractive now

CLSA said China is now trading on a cyclically adjusted earnings multiple of 12.0x, versus 9.2x in early September or 8.2x at the start of the year.

While this is still a discount to the rest of emerging markets—EM excluding China trades on a CAPE of 14.0x—but not as extreme as the 36% discount on offer in early September.

Besides, it acknowledged that while India’s equity market remains expensive, current valuations have moderated, making them slightly more attractive for investment.

The cyclically adjusted PE ratio has decreased from 37.9x to 33.5x, while the price-to-book ratio has fallen from 4.5x to 4.0x.

This warranted book multiple, estimated at 3.5x, now reflects a smaller premium.

The brokerage also pointed out that India’s earnings momentum, though softened, remains strong.

Projected earnings per share (EPS) growth for 2025/26 is anticipated to reach 18% and 14%, respectively, backed by stable GDP forecasts and a solid rupee.

Additionally, the stability of the rupee and local currency earnings has driven dollarized EPS back in line with its 30-year trend.

Risks on the horizon for India

Despite its optimism, CLSA also highlighted potential risks to Indian equities, particularly a surge in market issuance.

The firm noted that the cumulative 12-month issuance level is nearing 1.5% of the market cap, a historical threshold that could weigh on market performance if demand doesn’t keep pace.

The brokerage also maintains caution, pointing out that India’s heavy reliance on energy imports, especially oil, makes it vulnerable to price fluctuations.

“We remain concerned about the potential for risk premium in the oil price or at worst, a substantive supply interruption from Iran-Israel tensions,” it stated.

However, as long as energy prices remain manageable, India is seen as an oasis of relative stability amid global market turbulence.

Trump’s tariffs could spark a pivot away from China

The brokerage expressed apprehensions over Trump’s second term, which could spark fresh trade disruptions.

Lighthizer’s commitment to high tariffs could result in early economic turmoil, potentially affecting global growth.

While China’s direct exposure to US trade is limited to 2.9% of GDP, CLSA pointed out the country’s vulnerability through indirect trade routes and its rising export dependency.

In light of growing tensions, US investments may further pivot away from China as corporations continue implementing “China plus one” strategies to mitigate supply chain risks.

CLSA noted that India stands to benefit from this shift, given its scalable growth potential, manageable leverage, and low foreign equity ownership compared to other emerging markets.

The post CLSA shifts focus from China to India amid Trump’s return and economic challenges appeared first on Invezz

0
FacebookTwitterGoogle +Pinterest
previous post
Michael Burry loads up on Alibaba stock: should you buy it too?
next post
US approves $6.6 billion chip funding for TSMC in Arizona ahead of Trump inauguration

Related Posts

European Union regulators accuse Apple of breaching the...

June 26, 2024

Skydance bid for Paramount hinges on Shari Redstone...

May 5, 2024

Inflation pressure lingering from pandemic is keeping Fed...

May 31, 2024

Summer demand could support OPEC+ output increases, say...

May 29, 2025

European markets open: Stoxx 600 gains 0.3%; focus...

June 4, 2025

Renault stock price: insulated from trade war, but...

April 11, 2025

CDC data highlights surge in obesity rates, driving...

September 13, 2024

OpenAI’s ChatGPT Pro is losing money, CEO Sam...

January 6, 2025

These 2 stocks reporting earnings next week often...

February 2, 2025

Shaking seats and piped-in fog: How 4DX is...

May 30, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest News

    • Interview: Strategic location gives Brazil Potash cost advantage in domestic fertiliser market, says CEO Matt Simpson

      June 1, 2025
    • Canada’s Q1 GDP expands by 2.2%, driven by exports spike ahead of potential US tariffs

      June 1, 2025
    • President Trump to host farewell for Elon Musk as DOGE leader steps away

      June 1, 2025
    • UK’s digital banks face divergent fortunes: Starling stumbles, Monzo and Revolut soars

      June 1, 2025
    • Trump wants Apple to shift iPhone production from India to the US: here’s what it means

      May 18, 2025

    Categories

    • Business (3,022)
    • Investing (2,459)
    • Latest News (1,994)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 americaninvesthub.com | All Rights Reserved