Investor sentiment towards Indian equities has improved even as it deteriorates for Chinese equities. As a result, the share of the MSCI Emerging Markets index represented by MSCI India has risen to nearly 20%, while that of MSCI China has dropped from 43% to 24%. This change has gone well beyond the underlying earnings trend.
Net income expectations for Indian equities have also improved, but by nowhere near as much as have equity prices. For Chinese equities, profit expectations have fallen, but by less than the overall market value.
The explanation for the divergence? Valuations. The forward price-earnings ratio for Indian equities has increased significantly, by nearly 50% relative to the decade prior to the Covid pandemic. Valuations for Chinese equities, by contrast, have declined by nearly 10%.
Disclaimer
This material is issued and has been prepared by BNP PARIBAS ASSET MANAGEMENT UK Limited (“BNPPAM UK”). Registered in England No: 02474627, registered office: 5 Aldermanbury Square, London, England, EC2V 7BP, United Kingdom. BNPPAM UK is regulated by the FCA under UK laws, which differ from Australian laws. In Australia, BNPPAM UK is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 in respect of the financial services. This material is distributed in Australia by BNP PARIBAS ASSET MANAGEMENT Australia Limited ABN 78 008 576 449, AFSL 223418. This material is produced for information purposes only and does not constitute:
an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or
investment advice.
Opinions included in this material constitute the judgement of BNPP AMAU at the time specified and may be subject to change without notice. BNPP AMAU is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio.
Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material. Past performance is not a guide to future performance and the value of the investments in financial instrument(s) may go down as well as up. Investors may not get back the amount they originally invested. The performance date, as applicable, reflected in this material, does not take into account the commissions, costs incurred on the issue and redemption and taxes. All information referred to in the present material is available on www.bnpparibas-am.com.
