Wood: In reference to Indian and Chinese stocks, Christopher Wood, global head of equity strategies at Jefferies, is opposed to any “dramatic move,” per the Jefferies Greed & Fear report.
Wood says that there is “could not be more dramatic” contrast between China and India. Greed & Fear’s long-only India and China portfolios have performed very differently, according to the investor. The India portfolio has gained 41.2% year to date in dollar terms (on a total-return basis), while the China portfolio has decreased by 12.1%.
The portfolio’s top-performing stock in India has increased by 309% year to date, while the worst-performing stock in China has decreased by 55%.
“Typically, such divergent outcomes would indicate that it would be best to sell India and purchase China. Greed & Fear, however, lacks the conviction to take such a drastic step. Nobody else does either, although if there is a positive surprise on the policy front, China’s outperformance could spike at any time, according to Wood.
The conviction regarding India stemps from the most recent GDP quarterly data. In Q3CY23, the real GDP increased 7.6% YoY, a percentage point higher than expected. The last ten years have been reversed, with investment now driving the economy instead of consumption.
In the report, Jefferies restates its previous assessment of Indian stocks. It stated in an October report that large-cap valuations were not overly high by historical standards. It made the point that, in spite of the widespread belief that India—and not China—is Asia’s long-term structural growth story, foreign investors were not as heavily weighted on the country as was anticipated.
During the tightening by the RBI between May 2022 and February 2023, it was emphasized that Indian equities never corrected to the extent that foreign investors had expected. For this reason, given the optimism surrounding the structural story, any retreat in India was probably best seen as a buying opportunity.
