Among Asia’s leading equity markets, India and Japan have reigned supreme since the eruption of the Covid-19 pandemic. Even before the virus struck, Indian stocks had been enjoying a spectacular bull run, powered by the country’s rapid growth and strong corporate earnings. Since 2014, the Nifty 50, one of India’s main stock indices, has soared nearly 300 per cent. The fierce rally in Japan’s stock market is more remarkable given that it took over three decades for the country’s two main equity gauges to surpass the levels reached just before the bursting of the late 1980s asset bubble. The combination of the end of decades of deflation, far-reaching corporate governance reforms, and political and policy stability convinced many fund managers the rally was built on solid foundations.
India and Japan also benefited from the deterioration in sentiment towards Asia’s largest economy. The reshaping of global supply chains and the cyclical and structural downturn in China proved a boon for both countries’ stock markets. However, over the past months, the two linchpins of the “Asia ex-China” trade have lost some of their lustre. Several factors are at play. The most important one is Beijing’s announcement in late September of a sweeping stimulus package that sent a powerful signal that policymakers are increasingly concerned about the severity of the downturn and are willing to take action on multiple fronts to revive growth.
The facts speak for themselves. In September alone, foreign investors bought a net US$20 billion of Chinese securities, the largest monthly inflow since 2021. The CSI 300 index of Shanghai and Shenzen-listed shares has entered a bull market and is up 23 per cent since September 13. According to data from HSBC, emerging market funds have an overweight position in Chinese stocks for the first time in 10 months while Asian funds’ holdings have risen to a five-year high.
**Interview with Market Analyst, Ravi Mehta**
**Editor:** Good afternoon, Ravi! Thank you for joining us today to discuss the performance of equity markets in Asia, particularly India and Japan since the onset of the Covid-19 pandemic.
**Ravi Mehta:** Thank you for having me! It’s great to be here.
**Editor:** Let’s dive right in. India and Japan have shown remarkable resilience during the pandemic. What factors have contributed to India’s strong stock market performance?
**Ravi Mehta:** India’s stock market has been buoyed by a combination of factors. Pre-pandemic, India was already on a bull run due to its rapid economic growth, increasing foreign investments, and government reforms aimed at improving the business environment. The pandemic fueled a tech and digital transformation, leading to significant investments in sectors like IT and e-commerce, further lifting market sentiments.
**Editor:** That’s interesting! And what about Japan? How has its market fared in comparison?
**Ravi Mehta:** Japan has its unique strengths. Despite slower growth rates compared to India, the Japanese market has benefitted from strong corporate governance reforms and massive monetary stimulus from the Bank of Japan. Moreover, Japan’s export-oriented economy has rebounded strongly post-pandemic, especially in sectors like technology and automotive.
**Editor:** With both nations excelling, are there any key differences in their stock market dynamics?
**Ravi Mehta:** Absolutely. Indian markets tend to be more volatile and are characterized by retail investor participation, while Japan’s markets are larger and more institutionally driven. Moreover, India’s growth potential is often seen as more robust, given its demographic advantage and fast-growing middle class, whereas Japan faces challenges related to an aging population which impacts long-term growth potential.
**Editor:** Looking ahead, what should investors take into account when considering investments in these markets?
**Ravi Mehta:** Investors should assess market conditions closely. In India, the focus should remain on sectors driving the growth, such as technology and renewable energy, but also be wary of potential geopolitical tensions and inflation. For Japan, sustainability and innovations, especially in technology and green energy, will be key contributors. Diversification remains crucial in these markets.
**Editor:** Thank you for sharing your insights, Ravi! It sounds like both India and Japan have distinct advantages that could shape the future of their equity markets.
**Ravi Mehta:** My pleasure! It’s an exciting time for investors in Asia, and I’m looking forward to seeing how these dynamics evolve.
**Editor:** Thanks again for your time, and we look forward to more updates from you in the future!
