New Delhi: Amid the recent exodus of Foreign Institutional Investors (FIIs) from Indian markets, brokerage firm CLSA has reversed its previous strategy, stating that it ‘reversed its tactical allocation in early October, returning to a benchmark on China and 20 percent overweight on India.’
CLSA, in its latest note, observed that ‘misfortune happens in threes’ and stated that India appears to be ‘among the least exposed markets’ to the negative impact of Trump’s trade policies.
“…Investors we met this year have been waiting specifically for such a buying opportunity to address Indian underexposure. Domestic appetite remains strong, offsetting foreign jitters and valuation, though pricey, is now a little more palatable,” CLSA said in its latest note. “The initial reaction was to rent rather than buy the rally, yet we committed funds at the start of October by tactically deploying some of our over-exposure on India to China,” CLSA note made by Alexander Redman and Wei Sheng Wan said.
Here are some key observations from the CLSA report
- Misfortune can happen in threes. So it has played out for the Chinese equities over the past week. Trump 2.0 heralds a trade war escalation just as exports become the largest contributor to China’s growth.
- We are anxious that these concerns lead to a buyers’ strike by offshore investors who built China exposure post the initial PBOC (People’s Bank of China) stimulus in September.
- India has seen strong net foreign selling since October, while investors we met this year have been waiting especially for such a buying opportunity to address Indian underexposure.
- Domestic appetite remains strong, offsetting foreign jitters and valuation, though pricey, is a little more palatable.
