Investors fleeing China stocks turn to India

An investor walks past an electronic board showing stock information at a brokerage house in Fuyang, Anhui province, China.
An investor walks past an electronic board showing stock information at a brokerage house in Fuyang, Anhui province, China.PHOTO: REUTERS

MUMBAI • The tumult in China's stock market has turned into a blessing for Indian shareholders.

International investors are pulling out of China, fuelling record outflows through the Shanghai-Hong Kong exchange link, amid a US$2.8 trillion (S$3.8 trillion) plunge in mainland equity values since June 12.

They have ploughed US$705 million into India over the same period, sparking a world-beating 7 per cent gain in the benchmark S&P BSE Sensex index.

China's interventionist response to the rout - including unprecedented trading restrictions - has prompted foreigners to shift their equity exposure to India, according to hedge fund Alexander Alternative Capital LLC.

The US$2 trillion Indian economy, which got a fresh boost from tumbling crude prices this month, is less exposed than its emerging-market peers to slowing growth in China, Aquarius Investment Advisors said.

"The recent travails in China make India seem like an oasis of calm in terms of volatility," said Mr Jonathan Schiessl, the head of equities at the Britain-based Ashburton Investments.

Gains in Indian shares over the past six weeks mark a turnaround from the preceding four months, when China's bull market and doubts over Prime Minister Narendra Modi's economic policies kept foreigners away. The Sensex tumbled 11 per cent from this year's peak on Jan 29 through June 12, making it the world's worst performer after Egypt.

India's economy grew 7.5 per cent in the March quarter, beating China's 7 per cent growth, while the International Monetary Fund predicts India will outpace its neighbour in the current fiscal year.

The longer-term growth outlook is also stronger in India because of its superior demographics, according to Franklin Templeton Investments.

"India is in a phase in which multiple engines of growth can drive GDP from 7 to 8 per cent to 9 to 10 per cent in the next five years," said Mr Sukumar Rajah, who manages about US$9 billion as chief investment officer of Asian Equity at Franklin Templeton in Singapore.

"For China, we expect growth to decelerate over the next few years."


A version of this article appeared in the print edition of The Straits Times on July 25, 2015, with the headline 'Investors fleeing China stocks turn to India'. Subscribe