Investment committee conversations

China and India were the topic of conversation in one of our investment committee meetings this month.

Lauded for its management of the pandemic and having returned to growth, in 2020 China was viewed as the place to be for investors. By contrast, India was struggling amidst the challenges of the Delta variant of the disease.

MSCI China vs MSCI India: 1 January 2020 to 17 February 2021

Source: FE fundinfo, total returns in sterling

Fast forward to today and no one would’ve predicted how dramatically things could change, with India significantly outperforming China over the past six months or so.

MSCI China vs MSCI India: 17 February 2021 to 9 September 2021

Source: FE fundinfo, total returns in sterling

The tech concerns were a catalyst for falls in China back in February, and the bad news got worse when the government essentially wiped out all of the value in educational stocks. Add to that concerns over Evergrande in recent days and possible contagion into the real estate and shadow banking sectors, and investors are spooked. We believe there could be more volatility in the short term but longer term, China still remains an attractive investment option.

By contrast, India has been resilient, with growth starting to come through, aided by less exposure to tech companies. It’s a bit like investing in China 10 years ago in terms of the growth through the likes of urbanisation and infrastructure. Importantly, India also has better corporate governance and higher returns on capital businesses. Domestic interest in the stock market is also picking up. Although valuations are more expensive, it remains one of our preferred long-term emerging market investments.

Elite Rated Chinese equity funds and trusts:

Fidelity China Special Situations
FSSA Greater China Growth
Invesco China Equity
JPMorgan China Growth & Income

Elite Rated Indian equity funds:

Goldman Sachs India Equity Portfolio
Stewart Investors Indian Subcontinent Sustainability

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