China or India: On who will emerging markets guru Mark Mobius bet his money on?

China or India: On who will emerging markets guru Mark Mobius bet his money on?

China’s market slowdown will only help India with more foreign investments, says veteran emerging markets investor Mark Mobius.

“Have 25% of our portfolio exposed to Indian stocks, the country will continue to be our largest allocation,” Mobius, who co-founded the London-based Mobius Capital Partners LLP in 2018 after three decades at Franklin Templeton Investments, told a private TV channel.

Mobius’ view is shared by several global investors too.

The gap in weightage between Indian and Chinese equities on the MSCI index has been narrowing with many global biggies picking shares on Dalal Street over those in Shanghai.

Since January 2021, India’s weight in the MSCI Standard Index has more than doubled from 8.9% to 18.2%, while China’s weight has declined from 40.1% to 25.4% during the same period.

This is the shortest-ever gap between the weights of stocks of the two countries. Analysts expect this gap to shrink further anticipating higher flows into India as economic uncertainty in China drives overseas fund managers out of the country.

“P/E ratio is a poor metric to consider India’s valuation when return on capital has been good,” says Mark Mobius, adding that the euphoria in Indian markets will continue, long-term growth trends are likely to be sustained.

MSCI cut dozens of Chinese companies from its global benchmarks following a market rout that’s erased trillions of dollars in value from the nation’s stocks.

The index provider removed 66 companies from its MSCI China Index in its latest quarterly review, the highest tally in at least two years. The changes, effective as of the close on Feb. 29, also apply to the MSCI All Country World Index. The removals add to risks for China’s already beaten-down market as index-hugging funds will have to purge these stocks from their portfolios. There’s at least $5.9 billion in exchange-traded funds tracking the MSCI China Index, the largest of which is the US-listed iShares MSCI China ETF, according to data compiled by Bloomberg.

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