Over the past three years, nearly $5 trillion has evaporated from the combined market capitalization of mainland China and Hong Kong. The market is significantly shrinking as global investors’ trust fails to recover. In contrast, the Indian stock market, classified as an emerging market, has risen to the world’s fourth-largest market over the last eight years.
According to an analysis by the American financial media outlet CNBC, based on HSBC data, the total market capitalization of companies listed in mainland China and Hong Kong has decreased by $4.8 trillion over the past three years since 2021. This is comparable to India’s total market capitalization of $4.63 trillion. According to data from the World Federation of Exchanges, the Indian Stock Exchange overtook the Hong Kong Exchange in January to become the third-largest in Asia.
The Chinese stock market has recently been characterized by a bear market. Mainland China’s CSI 300 index has fallen for three straight years, closing out with a decline of 11.4% last year. Hong Kong’s Hang Seng index performed even worse, with 2023 being its fourth consecutive decline, ending the year 13.8% lower. Both were the bottom performers among major Asia-Pacific indexes last year.
The slump in China’s market was mainly due to the contraction of the real estate sector, which significantly impacted the country’s economy. This led to a decrease in the stock prices of related companies listed in mainland China and Hong Kong, pulling down the overall market.
China has set its growth target for this year at 5%, but experts are skeptical. S&P Global Ratings forecasts China’s GDP growth rate to slow to 4.6% this year, down from 5.2% last year. In March, former HKEX CEO Nicolas Aguzin told CNBC that “lack of confidence in China, high interest rates, and geopolitics are all impacting valuations and lowering the number of new listings on the exchange.”
On the other hand, Indian stocks have rallied amid broader optimism about the country’s growth. The country’s benchmark Nifty 50 index has risen for eight straight years, registering gains of 20% in 2023.
New listing activities are also vibrant. According to EY India, the Mumbai Stock Exchange saw 220 IPOs last year, a 48% increase from 2022. This starkly contrasts with the sharp decrease in IPOs in mainland China and Hong Kong. EY India stated, “Deals in India made up just 6% of IPOs globally in 2019, but now it holds 27%, propelling it to the position of the world’s leading IPO market by deal volume.”
However, some point out that the Indian market is overvalued. It is observed that a market correction is inevitable due to the long-term accumulation of gains.
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