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Outperformed, China hears calls to learn from India’s mature stock market


Two months ago, China’s largest lender by market value The Industrial and Commercial Bank of China (ICBC), launched China’s first India-dedicated publicly offered investment fund. State-controlled ICBC said the Indian market offered the best opportunity for Chinese investors due to the prospects of double-digit growth.

“As the most important emerging market overseas, the Indian stock market’s long-term trend must be positive. For Chinese investors, the current moment offers the best opportunity to get started in Indian stocks,” Global Times, the news outlet controlled by the Chinese Communist Party, wrote.

Impressed with India’s mature stock market, China is not only investing but also willing to learn from it. There are calls in China to emulate the Indian market standards, Global Times wrote. In the past decade, Indian stock market has outperformed that in the Chinese mainland. Since October 2008, Indian stocks have gained by 394 per cent, while the main index in the Chinese mainland has only risen 70 per cent.

“Compared with the Chinese mainland stock market, India is more mature. It has far more foreign institutional investor (FIIs) with a high tolerance for risk, whereas the Chinese market is made up by mostly speculative private investors. This makes China’s A-Share market very volatile and sensitive to financial risks,” Liu Xiaoxue, an associate research fellow at the Chinese Academy of Social Sciences’ National Institute of International Strategy, told Global Times.

Liu said the difference reflected the Indian equity market’s long history compared with the market in China. The Bombay Stock Exchange, set up in 1875, was Asia’s first stock exchange, while the first stock exchange in the Chinese mainland was set up in 1990.

“India has had a massive trade deficit for decades. As a result, it’s done a lot of homework in attracting overseas investors such as FIIs, including making its stock market infrastructure compliant with international standards so as to protect investors’ interests,” she said, adding that Chinese regulators should learn from India.

Illustrating the difference between the Indian and Chinese stock markets, Liu said the Indian stock market allowed the free flow of capital and had shorting mechanisms that allowed investors to hedge against risks. But the Chinese mainland’s share market, due to the presence of state-owned enterprises, found it hard to design such a mechanism, she said.

Liu also said that the Indian market might benefit from China’s ongoing trade row with the US. “As concerns over trade tension linger, anyone looking to invest in Asian emerging markets may turn to India over China,” she said.

Source: Economic Times