In a candid assessment, Morgan Stanley has drawn attention to the contrasting investment scenarios in China and India. While the Chinese economy grapples with overinvestment, excessive leverage, and oversupply, India appears to offer a realm of untapped investment opportunities.
Jitania Kandhari, Deputy Chief Investment Officer for Solutions & Multi-Asset and Managing Director at Morgan Stanley, expressed her concerns about China’s economic landscape. She remarked, “China is overinvested. It’s overleveraged and it’s oversupplied. And then it has this geopolitical cloud over it,” shedding light on the myriad challenges China currently faces.
In stark contrast, Kandhari emphasized India’s underinvestment, attributing this to a decline in investment-to-GDP ratios. She highlighted the burgeoning prospects of investment and manufacturing in India, propelled by the emerging trend of a “China-plus-one” diversification strategy adopted by companies seeking resilience in their supply chains.
India’s property sector, in particular, caught Kandhari’s attention as being undersupplied, with a stark disparity compared to China’s excesses in this domain. China’s real estate sector has grappled with mounting debts and sluggish sales, with new home sales for the top 100 developers plummeting by approximately one-third in June and July year-on-year.
Kandhari expounded on India’s promising trajectory in the real estate sector, driven by initiatives like “Make in India” and the establishment of global centers within the country. She noted, “So India story definitely feels like it has legs.”
Despite these discernible disparities, Kandhari acknowledged that select pockets within China still offer investment opportunities, dependent on the nation’s economic growth trajectory. However, she cautioned investors to consider elevated risk premiums in both public and private Chinese assets due to geopolitical concerns and a decline in nominal growth.
China’s recent economic data has fallen short of expectations, further complicating its investment landscape. Kandhari underscored the need for economic revival in specific sectors, such as green technology and semiconductors, where pricing power and growth prospects remain.
In conclusion, Kandhari opined that any signs of resurgence in China would likely be confined to limited sectors. While sentiment regarding China may have weakened, Kandhari suggested that true capitulation, particularly in terms of asset flows, remains elusive.
As investors weigh these dynamics, the investment landscapes of China and India continue to evolve, presenting unique challenges and opportunities for discerning market participants.
