Why is the world’s top public market investor betting on China over India?

BlackRock, the largest asset management firm in the world and known for its public market exposure, is snipping its investments in Indian equities as it is now seeing more attractive opportunities in China.

BlackRock is bullish on China due to attractive valuations amid expectations that policy hurdles will ease next year, according to a Bloomberg report.

“Valuations are key right now,” Belinda Boa, head of active investments for Asia Pacific at the world’s biggest asset manager, said at a briefing, according to the news agency.

“Because of the outperformance we’ve seen in India this year, on a relative basis, we are starting to take profits and become more positive on Chinese growth stocks," she added.

BlackRock has shaken its Asia-focused portfolios to have more neutral positions on China, up from underweight, and narrowed its underweight call on Internet services companies, Bloomberg said.

Chinese stocks, especially in the technology sector, have been battered in recent months due to regulatory screws that were tightened over the last one year in the country. At the same time, Indian stock market indices scaled new highs as the spectre of a third wave of Covid-19 seemed to recede in line with a widespread vaccination programme.

The Indian markets, which tended to correct in the past far swiftly led by offshore investors, had partly decoupled from that source of capital. This is because the huge domestic flow of capital into the stock market, driven by the positive wealth creation in the recent past and lack of confidence over other asset classes like real estate, has become a key force multiplier.

Meanwhile, Blackrock’s call to switch towards China comes as a time when the top Indian market indices have seen around 5% correction after hitting their peak in the past few weeks.

Most analysts believe Indian markets had run ahead of fundamentals and are now retracing steps as expected to bridge the gap.