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All prophecies that the unprecedented COVID-19 pandemic will undermine China’s importance in world economic trends seem to have been thrown out of the window. The land of the Dragon is back in the race!
The re-opening of China’s economy as the government announced a reversal of its long drawn zero-COVID policy has turned forecasts upside down. The latest Bank of America (BofA) survey of global fund managers points out that the net percentage of fund managers who expect a stronger Chinese economy rose to 91 percent in January 2023 from 0 per cent in August last year.
So, what’s changed? Recession fears are ebbing. Inflation is coming under control following restrictive policies of central banks. There is greater optimism about the revival of emerging markets. Global fund managers’ sentiment has flipped, leading to renewed risk appetite and a rotation from the US to emerging markets.
Investor optimism is clearly reflected in the knee-jerk movement of global equity indices. The MSCI Emerging Markets Index went up 7.4 percent this year till January 17, led by China that rose by a higher 10.98 percent. Market veterans say Chinese stocks are seeing their best start this year since 2006.
Is it good news for Indian equities too? The MSCI India, which is in the red, spells caution. One reason could be the steep increase in valuations through 2022. In comparison to China, one can also argue that Indian equities rose in the last two years as its domestic economy displayed considerable resilience in the recovery from the pandemic. Investments in real estate and infrastructure, two big drivers of the core sector, rose in 2022. Early results for the December quarter indicate decent revenue expansion and profitability at India Inc.
Still, the risk of a global slowdown in 2023 cannot be brushed aside totally.
Perhaps, Indian equities are waiting for the next cue -- the Union Budget 2023 -- that would signal how government policies would steer the country towards growth as the pandemic uncertainties wane. Here’s a wish-list from markets for the FM.
Our Budget Snapshots for the day shows that private capex in the country has not moved much, leaving the government to take more on its plate. Will that change this year?
Investing insights from our research team
ICICI Prudential: Business transformation a high point, but growth elusive
Budget 2023 expectations in consumption & retail: Cautiously optimistic, especially rural markets
IndusInd Bank Q3 — Steady quarter with great earnings outlook
Delta Corp: In-line Q3FY23 results, expansion key to growth
What else are we reading?
Budget 2023: It’s high time to make the tax code simple and fair
Budget 2023: Strong global headwinds call for sharper focus on fiscal consolidation, capex push
Startup Street: Will 2023 see a face-off between big private equity and strategic buyers?
Ending money transfers to brokers will increase transaction costs
Right energisers in Budget 2023 can charge up green capex
New oil reality bites for Kremlin (republished from the FT)
Boards must censure CEOs for personal misconduct
Technical Picks: Hindalco, Central Bank, SAIL, Reliance Industries and USD-INR (These are published every trading day before markets open and can be read on the app).
Vatsala Kamat Moneycontrol Pro
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