India’s Winning: Its Market Is Hitting A Stride, Just As China Falters

India’s Winning: Its Market Is Hitting A Stride, Just As China Falters
Reda Farran, CFA

26 days ago6 mins

What happened last week?


  • Growth in the world’s biggest economy trounced forecasts last quarter.
  • Bitcoin has slumped since the launch of the first US ETFs investing directly in the cryptocurrency.


  • The European Central Bank (ECB) kept interest rates steady for a third straight meeting.
  • ASML’s orders more than tripled last quarter, in the latest sign of the chip industry’s revival.


  • The Bank of Japan (BoJ) opted to keep its negative interest rates.
  • India surpassed Hong Kong to become the world’s fourth-biggest stock market.

What does all this mean?

US economic growth blew past expectations in the fourth quarter, as lower inflation and a hot job market encouraged Americans to keep spending. The world’s biggest economy grew at a 3.3% annualized rate last quarter compared to the one before – slower than the 4.9% pace recorded in the third quarter, sure, but trouncing forecasts of 2%. That was mainly driven by the economy’s biggest growth engine, consumer spending, which rose at a 2.8% pace. The figures are the latest proof of the US economy’s resilience in the face of the Federal Reserve’s aggressive run of interest rate hikes: instead of plunging into recession last year, as many had warned, it expanded by 2.5% instead.

In a classic example of “buy the rumor, sell the news”, the price of bitcoin has dropped by more than 20% since the first US ETFs investing directly in the crypto became more than just chatter, and actually launched. Mind you, that dip was made worse by the US dollar’s sudden strength, plus higher bond yields, and some big one-off transactions. And it’s not the first time bitcoin’s taken a turn for the worse after a major product launch. But still, investors’ speculation that the new ETFs would catalyze wider bitcoin adoption by institutional and retail investors was likely already built into bitcoin’s near-160% surge last year.

The ECB kept its key interest rate on hold at a record high of 4% for a third straight meeting, and stuck with its previous message that rate cuts may still be some distance away. That warning seems to be falling on deaf ears though, with traders still betting that the ECB is more likely than not to cut rates in April. And that coincides with economists making gloomy revisions to their 2024 projections for eurozone growth and inflation, to reflect discouraging data on industrial production, producer prices, business orders, and retail sales. And, to be fair, with attacks on ships in the Red Sea disrupting supply chains and threatening to reheat the bloc’s cooling inflation, you can see why the ECB might be a tad extra cautious about changing course too hastily.

Europe’s most valuable tech company, ASML, is the sole producer of the equipment needed to make the most sophisticated semiconductors, so demand for its products is a bellwether for the industry’s health. And its latest results suggest the chip industry is roaring back to life after a slump that dates back to the pandemic. Orders for ASML’s machines jumped to a record €9.2 billion ($10 billion) in the fourth quarter – a more than threefold increase from the previous quarter and way more than the €3.6 billion that analysts were forecasting. The Semiconductor Industry Association might not have been too surprised by the comeback: it reported a rise in global chip sales in November for the first time in more than a year, on the back of rising demand for AI.

The BoJ has been hanging onto its ultra-low interest rates with two hands, hoping to nudge consumer prices higher after decades of battling with economy-crushing deflation. So it wasn’t too surprising when it held its key rate at minus 0.1% last Tuesday. The BoJ has been the only major central bank with rates in negative territory for a while now. However, with Japan’s inflation exceeding the Bank’s 2% target for almost two years, economists figure the days are probably numbered for those negative rates. They expect the BoJ to raise rates in April after it has assessed the results of the country’s annual compensation negotiations. After all, higher pay is crucial in securing a positive cycle of rising prices and income that feeds into economic growth.

The total value of India’s stock market surpassed Hong Kong’s for the first time, making it the fourth-biggest equity market in the world. And it shouldn’t come as a huge surprise. India is benefitting from a rapidly expanding base of retail investors, robust corporate earnings, and a young and growing population. What’s more, global investors and companies see it as a compelling trade and manufacturing alternative to China, with a stable political environment and a big, fast-growing, consumption-driven economy.

This week’s focus: India flexes, as China sags

India’s remarkable sprint has coincided with a historic slump in Hong Kong and China, with the total market value of their stocks having tumbled by more than $6 trillion – roughly the equivalent to the entire market capitalization of Japan – since their peaks in 2021. It’s been rough sledding for China these past few years, with strict pandemic restrictions, new regulatory actions targeting corporations, an ongoing debt crisis in the property sector, escalating geopolitical tensions with the West, and the implications of a shrinking (and fast-aging) population weighing on the country’s stocks.

Making matters worse, pessimism about the country’s prospects has further deepened this year, with the government failing to announce any major new economic stimulus. But it did emerge last week that authorities are considering a package of measures to help prop up the country’s drooping stock market. Specifically, policymakers are seeking to mobilize about 2 trillion yuan ($278 billion), mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilization fund to buy shares onshore through the Hong Kong exchange link. Authorities have also earmarked at least 300 billion yuan in local funds to invest in onshore shares.

This initiative follows recent government efforts to bolster the country’s faltering stock market – including limits on short-selling, cuts to trading fees, and purchases of bank shares by a government investment fund. But so far those measures have failed to halt China’s stock market slide, with the CSI 300 index down by 18% over the past year.

The week ahead

  • Monday: Nothing major.
  • Tuesday: Japan unemployment (December), eurozone economic growth (Q4), eurozone economic sentiment (January), US consumer confidence (January). Earnings: Alphabet, Microsoft, General Motors, Pfizer, AMD, Starbucks, Mondelez.
  • Wednesday: Japan industrial production and retail sales (December), Federal Reserve interest rate announcement, China PMIs (January). Earnings: Qualcomm, Boeing, Mastercard, Novo Nordisk, Thermo Fisher Scientific.
  • Thursday: Eurozone inflation (January), eurozone unemployment rate (December), Bank of England interest rate announcement. Earnings: Amazon, Apple, Meta, Merck.
  • Friday: US jobs report (January). Earnings: ExxonMobil, Chevron, AbbVie.


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