Why India Is a Bright Spot among Weak Emerging Market Equities
Why Asset Managers, Financials Are the Worst-Hit by the Slowdown
Fastest-growing economy
India’s economy has shown fundamental resilience. The nation is benefiting from lower oil prices and is improving its domestic economy, which is driven by infrastructure and consumption. India’s economy grew by 7.3% in the December quarter, backed by 12.6% growth in manufacturing and 6.5% growth in mining.
India is the only country among major economies to report strong growth in manufacturing as the economy benefits from a new government led by Narendra Modi. The government forecasts 7.6% growth for the year ending March 31, 2016. Indian equities have been the best performers in 2016, with a collective fall of 5.8%. Institutional investors have deployed funds into India to take advantage of a long-term growth story.
Companies that would benefit from a bullish trend in emerging market equities include BlackRock (BLK), Goldman Sachs (GS), HSBC Holdings (HSBC), and Blackstone (BX).
China’s slowdown
India’s growth story is not offsetting a fall due to the slowdown China. China’s Shanghai Composite Index has fallen by 22% in 2016. Chinese vice president Li Yuanchao, speaking at the World Economic Forum in Davos, Switzerland, said that China’s markets are not yet mature, and the government will boost regulations in an effort to limit volatility.
Fang Xinghai, vice chairman of the China Securities Regulatory Commission, also assured investors that his government is prepared to intervene again to stave off any large liquidity problems that could lead to systemic risks.
China’s gross domestic product for 2015 came in at 6.9% against the government’s 7% target. In 4Q15, China saw growth of 6.8%. China has set a target growth rate of 6.5% for 2016, since its transition from an export- and investment-led economy to a service- and a consumer-driven economy is expected to take some time.
The persisting slowdown in China has put additional pressure on commodity prices. This has resulted in lower exports from Brazil and Russia. Russia’s economy has been badly hit by a fall in crude oil prices. Overall, emerging markets (EEM), except for India, are in a recessionary mode.
Browse this series on Market Realist:
