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Business Standard
31-07-2025
- Business
- Business Standard
Trump's tariffs threaten to deepen India's $248 bn stock market rout
India's faltering equities market faces the risk of more losses after the nation was slapped with one of the highest tariff rates in Asia on its exports to the US. President Donald Trump said he would impose a 25 per cent levy on Indian goods starting Friday and threatened an additional penalty over the country's energy purchases from Russia. That's a steeper hit than the 15 per cent to 20 per cent range applied on several regional peers. India's stock benchmark has lagged most major global peers this year amid concerns over a slowdown in its economy and corporate earnings. The underperformance has deepened this month as foreign investors have accelerated their withdrawals, turning attention to cheaper or more attractive markets like Hong Kong and South Korea. The value of India's stock market is down $248 billion since reaching a record on July 2. 'India is known to be a tough negotiator when it comes to trade, and this time the toughness seems to have effected an undesirable outcome,' said Tomo Kinoshita, global market strategist at Invesco Asset Management. 'The 25 per cent tariff should have a moderate negative impact on India's stock market, especially for export sector stocks.' The MSCI India Index is on track for its weakest month since February. While it has eked out a gain this year, its performance trails the almost 14 per cent jump in MSCI Asia Pacific Index and pales in comparison to the 36 per cent surge in the MSCI Korea Index, which has rallied on optimism surrounding bold reforms under a new president. Futures contracts on the local benchmark NSE Nifty 50 Index dropped 0.6 per cent after Trump's announcement while the iShares MSCI India ETF slid 1.5 per cent. The situation remains fluid, as the US president later said negotiations with India continue and whether or not a trade deal can be reached will be known 'at this end of this week.' India's once-lauded relative insulation from global turmoil is losing its shine. With earnings offering few positive surprises and valuations remaining among the highest in the region, investors are likely to stay cautious in the near term. The MSCI India trades at almost 22 times its one-year forward earnings, well above its long-term average and gauges of Chinese and Korean shares. Even as stocks decline, India's equity capital market is humming. Fundraising from initial public offerings, share placements to large investors and block trades has topped $6 billion for a third straight month. That level of issuance — last seen in late 2024 — coincided with a double-digit correction in local shares. 'High valuations and slowing profits are inverting buyer-seller incentives,' said Prateek Parekh, a strategist with Nuvama Institutional Equities. Business founders and private equity investors are on a 'selling spree,' while domestic flows are slowing. 'Foreign fund flows are now critical.' That boost will be key, as foreign investors — who have withdrawn more than $2 billion from local shares this month — weigh whether earnings can justify the rich valuations. The April-June results season so far has done little to ease concerns. Earnings from key technology and financial firms, the two sectors that together make up about 40 per cent of the market's value, have largely underwhelmed. Yet some believe the tide could still turn. Interest-rate cuts and a pick-up in economic growth could end the 'flat-to-weak' positioning of local stocks and lay the foundation for an earnings rebound in the second half of the year through March, according to Emkay Global Financial Services' strategist Seshadri Sen. Rahul Chadha, founder and chief investment officer at New York-based Shikhara Investment Management LP. Chadha, said his fund has raised exposure to Korean stocks in recent months due to benefits including improved corporate governance. 'Honestly, 2025 looks challenging for India to close the performance gap,' he added.
Business Times
14-07-2025
- Business
- Business Times
Sovereign wealth funds fear missing China tech boom: survey
[LONDON] Global sovereign wealth investors managing US$27 trillion in assets are increasingly bullish on China's tech sector because they don't want to miss out on the next waves of innovation, according to an annual survey by Invesco Asset Management. Some 59 per cent of respondents see China as a high or a moderate allocation priority over the next five years, up from 44 per cent last year, the survey conducted among 83 sovereign wealth funds and 58 central banks during the first quarter of 2025 showed. 'There's a bit of fear-of-missing-out effect here with China tech boom like Silicon Valley of some years ago,' said Rod Ringrow, head of official institutions at Invesco. 'There's a general view from the sovereign sector here that Chinese tech will be globally competitive and they want to make sure they're part of the programme now.' Attractive local returns are cited as the top driver for future flows, reflecting confidence in the sector's valuations and earnings potential relative to other markets, the survey said. The shift comes despite rising tensions between China and the US. It comes at the cost of reduced allocations to longer-maturity US government debt amid concerns about fiscal sustainability and policy volatility, the report said. Sovereign asset managers are also re-evaluating passive index strategies, particularly those focused on exposure to US equities. Furthermore, central banks are building larger, more diversified reserves to withstand volatility, the report said. While the US dollar retains its dominance, gold's role as a defensive asset is growing. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'Central banks continue to buy gold and a lot of that is driven by weaponisation concerns,' Ringrow said. 'It's a core part of the reserve holdings due to anti-inflation protection but also because it can't be easily sequestered by someone else.' Sector-focused Ringrow said the bullish camp on China includes a number of US-based institutions. Still, the renewed interest doesn't mean a return to a broad-based 'rush to China' sentiment of the past, according to Invesco. Instead, it 'reflects a more deliberate, sector-focused approach, targeting areas where China is positioned to achieve global leadership, underpinned by both market momentum and strategic policy support,' the report said. This means that sovereign investors are orienting their China strategies around specific tech ecosystems, rather than broad macroeconomic exposure. These include semiconductors, cloud computing, artificial intelligence (AI), electric vehicles and renewable energy infrastructure, according to the report. Invesco cited a Middle Eastern sovereign wealth fund as saying that China will dominate solar, wind, EV, and battery markets for decades. A respondent from the Asia-Pacific region said that given the amount of resources and policy support from Chinese authorities, it's only a matter of time until the country closes the gap on the US in semiconductors, cloud computing, and AI. BLOOMBERG
Business Times
14-07-2025
- Business
- Business Times
Sovereign wealth funds fear missing China tech boom, survey says
[LONDON] Global sovereign wealth investors managing US$27 trillion in assets are increasingly bullish on China's tech sector because they don't want to miss out on the next waves of innovation, according to an annual survey by Invesco Asset Management. Some 59 per cent of respondents see China as a high or a moderate allocation priority over the next five years, up from 44 per cent last year, the survey conducted among 83 sovereign wealth funds and 58 central banks during the first quarter of 2025 showed. 'There's a bit of fear-of-missing-out effect here with China tech boom like Silicon Valley of some years ago,' said Rod Ringrow, head of official institutions at Invesco. 'There's a general view from the sovereign sector here that Chinese tech will be globally competitive and they want to make sure they're part of the programme now.' Attractive local returns are cited as the top driver for future flows, reflecting confidence in the sector's valuations and earnings potential relative to other markets, the survey said. The shift comes despite rising tensions between China and the US. It comes at the cost of reduced allocations to longer-maturity US government debt amid concerns about fiscal sustainability and policy volatility, the report said. Sovereign asset managers are also re-evaluating passive index strategies, particularly those focused on exposure to US equities. Furthermore, central banks are building larger, more diversified reserves to withstand volatility, the report said. While the US dollar retains its dominance, gold's role as a defensive asset is growing. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'Central banks continue to buy gold and a lot of that is driven by weaponization concerns,' Ringrow said. 'It's a core part of the reserve holdings due to anti-inflation protection but also because it can't be easily sequestered by someone else.' Sector-focused Ringrow said the bullish camp on China includes a number of US-based institutions. Still, the renewed interest doesn't mean a return to a broad-based 'rush to China' sentiment of the past, according to Invesco. Instead, it 'reflects a more deliberate, sector-focused approach, targeting areas where China is positioned to achieve global leadership, underpinned by both market momentum and strategic policy support,' the report said. This means that sovereign investors are orienting their China strategies around specific tech ecosystems, rather than broad macroeconomic exposure. These include semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy infrastructure, according to the report. Invesco cited a Middle Eastern sovereign wealth fund as saying that China will dominate solar, wind, EV, and battery markets for decades. A respondent from the Asia-Pacific region said that given the amount of resources and policy support from Chinese authorities, it's only a matter of time until the country closes the gap on the US in semiconductors, cloud computing, and AI. BLOOMBERG
