China’s Bold Stimulus: Investors Demand Aggressive Measures to Boost Growth – What’s Coming Next?

The euphoria around Chinese stimulus initiatives has caused investors to reconsider their attitude toward China. Notably, the increase in attitude toward China is coming at the expense of India. Furthermore, rising economic prospects in China have boosted the APAC ex-JP outlook to a 20-month high, according to a BofA Securities Asia fund manager poll. While fund managers regard Japan as their preferred market in Asia-Pacific, they have become hesitantly optimistic about China following the current wave of stimulus. On the other hand, they predict Korea will continue underperforming due to a lack of investor interest in the corporate value-up initiative.

After launching the most stringent monetary assistance measures since the epidemic, China promised to raise debt to restore its ailing economy considerably. “Growth expectations for China sprung back to life following the policy pivot,” BofA Securities stated in an investment report on Tuesday. Meanwhile, foreign portfolio investors (FPIs) have sold Indian stocks every trading session this month until October 15. Overseas investors sold Indian shares worth $7.3 billion in October, marking the worst monthly outflow since the pandemic’s peak in March 2020. According to the poll, more fund managers were overweight in India in August than the current number of investors. 

India, the region’s most expensive equities market, has just seen a sell-off. The benchmark Nifty50 has dropped about 5% from its record high, while the Chinese Shanghai Composite has risen nearly 19% since mid-September. At 24,971.30 points, the Nifty50 trades at 20.7 times its one-year projected earnings, higher than its long-term average. According to Bloomberg statistics, the Chinese Shanghai Composite is valued at 11.8x, almost 3% lower than its 10-year average.