Michael Kurtz, head of Asian strategy at Macquarie Capital Securities Ltd., comments on the outlook for Indian and Chinese stocks. He spoke in an interview in Mumbai today.
“Both markets are underweight in our regional portfolio allocation. The two face very different challenges. China’s are, at least for the next couple of years, much more structural and unavoidable. China has to begin reducing long-standing subsidies to its enterprise sector in order to increase the household income’s take in national income. This implies medium- to long- term headwinds for Chinese corporates.
In India’s case, the risks can be much more short term. If we can get past the cyclical overhang of monetary tightening and inflation risks, if we can get beyond the political uncertainties, the way could be open for a substantial better relative performance in the second half of the year. Given the fact that India seems to be capable of achieving structural GDP growth rates that increasingly are very competitive relative to the GDP growth rates of China, you can make the case that India will be the market to be in, in a 12- to 18-month time horizon.”
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