Compared to the Japanese stock market, more people are optimistic about the Chinese and Indian stock markets in the second half of the year

As investors flock to emerging markets, the stock markets of China and India may perform well in the second half of the year in Asia.

Recently, the media interviewed 19 Asian strategists and fund managers to investigate their views on the Asian markets in the second half of the year.

The survey results show that about one-third of the respondents predict that the Chinese stock market will perform the best in the second half of the year, while another one-third or so believe that the Indian stock market has the most potential. In comparison, the support rate for the Japanese stock market ranks third, but significantly lower than China and India.

The Fed rate cut is seen as a common positive factor for China and India markets, but investors favor these two markets for their unique reasons.

The survey shows that investors are optimistic about the Chinese stock market mainly due to its currently low valuation, coupled with expectations of new supportive policies; while the preference for the Indian stock market stems from the generally optimistic market sentiment post-election.

Joseph Little, Global Chief Strategist at HSBC Asset Management, wrote in his mid-year outlook:

We believe that low valuations and accelerated global economic expansion provide opportunities for emerging markets, especially Asian markets, to lead in the second half of the year.

In the previous quarter, the performance of the MSCI Emerging Markets Asia Index outperformed the broader MSCI Asia Index, marking the largest increase since 2009. According to Goldman Sachs data, Asian emerging markets were also the most net bought market in June, while global stock net selling was the fastest in two years.

In the Chinese stock market, some key indicators have entered a technical correction. However, media surveys show that analysts and fund managers are optimistic about the future performance of the Chinese stock market in the next six months, as global funds return and corporate profits improve.

HSBC is bullish on the Chinese market, with its Asian equity strategist Herald van der Linde stating that the negative sentiment in the Chinese stock market will gradually improve. Given that "Chinese economic activity is slowly improving," HSBC is increasing its holdings for the second half of the year.

On the Indian front, although the Modi-led coalition did not secure an absolute majority in parliament, it still emerged victorious in the elections. In June, after Modi promised policy continuity, foreign investors returned to the Indian stock market, pushing its total market value above $5 trillion for the first time.

Another survey on India shows that due to investors' confidence in corporate profit growth and the upcoming federal budget that may further boost consumer spending and infrastructure, the upward trend in the Indian stock market is expected to accelerate by the end of the year.

Moreover, more than half of the respondents indicated that by the end of 2024, the performance of Asian stock markets may surpass that of the US stock market, citing the Fed rate cut and lower valuations in Asian markets. However, most people believe that the increase will be limited to 10% or lower.