Why India is a Better Investment Opportunity Than China, According to Morgan Stanley

China and India: Contrasting Investment Opportunities

China’s Economic Challenges

According to Jitania Kandhari, Morgan Stanley’s deputy CIO for solutions & multi-asset and managing director, China is facing investment challenges due to overinvestment, overleverage, oversupply, and geopolitical concerns.

India’s Investment Potential

In contrast, Kandhari believes that India offers investment opportunities as it is currently underinvested. The country’s investment to GDP ratio has declined, but with the trade diversion from China to other countries, India’s investment and manufacturing sectors are expected to pick up.

China-Plus-One Strategy

Many companies have adopted a “China-plus-one” strategy to diversify their supply chains and enhance resilience.

“India story definitely feels like it has legs.”

Jitania Kandhari

Deputy CIO at Morgan Stanley

Housing Market Comparison

Kandhari highlights that India is undersupplied in terms of homes and property, while China is burdened with excessive supply and debt issues in its real estate sector.

New Cycle in India’s Real Estate

India is entering a new cycle in its real estate sector, with global centers establishing a presence in the country. This development adds further potential to India’s investment landscape.

Investment Risks in China

Although some areas of China may still offer investment opportunities based on its economic growth, Kandhari cautions that the risk premium for both public and private Chinese assets has increased due to geopolitical concerns and a decline in nominal growth.

Economic Challenges in China

China has been facing disappointing economic figures, and Kandhari emphasizes the need for the nominal side of the economy to improve. She mentions green technology and semiconductors as potential growth areas, but notes that overall investment opportunities in China may be limited.

Additionally, Kandhari states that capitulation in China has only occurred at the sentiment level and not at the flows level, indicating that it may take time for any significant upside in the market.

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