New Delhi/Beijing: Money managers are facing a significant shift as India’s population surpassed China’s this year, making it the world’s most populous country. This demographic milestone presents the potential for a long-term investment boom in India. Analysts at Goldman Sachs Group Inc predict that India’s share of the global equity market capitalization will quadruple by 2075, reaching 12% and putting it on par with China. In comparison, the US’s share is projected to drop to 22%.
Investors can benefit from the economic growth of both China and India. China, as the world’s second-largest economy, offers opportunities in its massive consumer market and advanced manufacturing. On the other hand, India has favorable relations with the West and a young workforce. With an expected annual growth rate of 6-7%, India’s economy is anticipated to outpace China’s. Its growing middle class will contribute to increased consumer spending beyond essential goods.
According to Conrad Saldanha, a portfolio manager at Neuberger Berman, India is one of the best global stories of structural growth. As companies seek manufacturing alternatives to China, India will benefit. However, Hugues Rialan, CIO for Asia at Pictet Wealth Management, believes that Indian stocks are expensive and prefers China for the next 12-24 months due to its expected economic reacceleration and low equity valuations.
Investors are increasingly comparing these two Asian giants to determine where to invest. Experts weigh in on which sectors and stocks are likely to benefit from this demographic shift.
Mark Mobius, partner and co-founder of Mobius Capital Partners, Dubai, highlights India’s favorable macro factors and recommends investing in technology and digitization. Stocks like APL Apollo Tubes Ltd, Metropolis Healthcare Ltd, Persistent Systems Ltd, CE Info Systems Ltd, and Dreamfolks Services Ltd are potential opportunities. As for China, Mobius believes that it won’t achieve the high growth of the past but acknowledges that there are still pockets of opportunities due to its enormous market size.
Michael Oh, portfolio manager at Matthews Asia, San Francisco, maintains an overweight position in both markets. He favors banks in India, particularly ICICI Bank Ltd, as consumers still lack basic financial services. In China, Oh believes that technology can enhance the quality of life and recommends investing in companies like KE Holdings Inc and Trip.com Group Ltd.
Hiren Dasani, managing director at Goldman Sachs Asset Management, Singapore, states that both markets will follow their own dynamics, and investors may rotate between them. India, with its long-duration growth story, offers a combination of scale, growth, and profitability. China, which focused on exports, infrastructure, and real estate in the past, is expected to shift towards domestic consumption as its next growth driver.
Ayaz Ebrahim, portfolio manager at JPMorgan Asset Management, Hong Kong, likes both markets fundamentally but gives a slight preference to China based on valuations. He highlights the industrial upgrade theme in China and sees opportunities in health care and renewable energy. In India, Ebrahim favors the financial sector, especially private banks and insurers, due to the growing population and higher spending power.
Cecilia Chan, CIO for Asia Pacific at HSBC Asset Management, Hong Kong, views India as a bright spot with its booming population, growing affluence, structural reforms, and good policy mix. She particularly favors the real estate sector and the financial sector, especially the largest private banks. In China’s aging market, Chan sees potential in communication services, information technology, and industrials, as well as state-owned enterprises.
Jason Pidcock, investment manager for Asian equity income at Jupiter Asset Management, London, recognizes India’s young population as a powerful driver of growth. He believes that the consumer, financials, and utilities sectors will benefit the most from India’s demographic dividend. However, Pidcock does not own any mainland Chinese companies due to geopolitical tensions and government influence.
Overall, investors have the opportunity to capitalize on the economic growth of both China and India. While India’s demographic advantage and favorable macro factors may make it an attractive long-term investment, China’s size and potential pockets of opportunities cannot be ignored.