For the first time, India overtakes Hong Kong as the world’s fourth largest stock market
By Ashutosh Joshi
India’s stock market has overtaken Hong Kong’s for the first time, another achievement by the South Asian country whose growth prospects and policy reforms have made it a darling of investors.
The combined value of stocks listed on Indian stock exchanges stood at $4.33 trillion as of Monday’s close, compared with $4.29 trillion for Hong Kong, according to data compiled by Bloomberg. This makes India the fourth largest stock market in the world. Stock market capitalization surpassed $4 trillion for the first time on December 5, with about half of that in the past four years.
India’s stock markets have soared, thanks to a rapidly growing retail investor base and strong corporate earnings. The world’s most populous country has positioned itself as an alternative to China, attracting new capital from global investors and companies alike, thanks to its stable political structure and a consumption-driven economy that remains among the fastest growing major countries.
“India has all the right ingredients to further drive growth momentum,” said Ashish Gupta, chief investment officer at Axis Mutual Fund in Mumbai.
The brutal rally in Indian shares has coincided with a historic slump in Hong Kong, where some of China’s most influential and innovative companies are listed. Beijing’s strict measures against Covid-19, regulators’ crackdown on companies, a crisis in the real estate sector and geopolitical tensions with the West have all eroded China’s appeal as a global growth engine.
They have also led to a stock market crisis that is now reaching epic proportions, with the combined market value of Chinese and Hong Kong stocks falling by more than $6 trillion since their peak in 2021. New listings in Hong Kong have dried up, while the Asian financial markets hub is losing its status as one of the world’s busiest locations for IPOs.
However, some strategists expect a reversal. UBS Group AG expects Chinese stocks to outperform Indian peers in 2024 as the former’s battered valuations point to significant upside potential once sentiment turns, while the latter are at “fairly extreme levels” according to a November report . Bernstein expects the Chinese market to recover and recommends taking profits on Indian stocks, which he believes are expensive, as emerged earlier this month.
That said, the momentum seems to be on India’s side for now.
Pessimism towards China and Hong Kong has deepened this new year in the absence of major economic stimulus measures. The Hang Seng China Enterprises Index, a gauge for Chinese stocks listed in Hong Kong, has already fallen about 13 percent after a record four-year loss in 2023. The measure is rushing to the lowest level in almost two decades, while Indian stock benchmarks recording at record levels.
Foreigners who until recently were enamored with the Chinese story are sending their money to the South Asian rival. Global pension and sovereign wealth managers also favor India, according to a recent survey by London-based think tank Official Monetary and Financial Institutions Forum.
Overseas funds poured more than $21 billion into Indian stocks in 2023, helping the country’s benchmark S&P BSE Sensex Index post an eighth straight year of gains.
“There is a clear consensus that India is the best long-term investment opportunity,” Goldman Sachs Group Inc. strategists including Guillaume Jaisson and Peter Oppenheimer wrote in a Jan. 16 note detailing the results of a survey from the firm’s Global Strategy Conference .
*NOTE: Market capitalization is calculated based on all outstanding shares. The data does not include ETFs and ADRs as they do not directly represent companies. It includes only actively traded, primary securities on the country’s stock exchanges to avoid double counting. Therefore, the values will be significantly lower than the market capitalization values of a country’s stock exchanges from other sources.
First print: January 23, 2024 | 8:04 am IST