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The article explores the implications of China's recent economic stimulus measures on its stock market and potential impact on foreign investment flows into India. Goldman Sachs's Asia Pacific Portfolio Strategist, Sunil Koul, expresses skepticism about a sustained bull run in Chinese stocks despite the recent rally. He emphasizes that China's structural challenges, including slowing growth, weakening demographics, and a struggling property sector, pose significant obstacles to a robust economic recovery.
Koul acknowledges that while China's stock market may have been oversold and could experience a tactical rally, it's unclear whether the stimulus will be sufficient to trigger a long-term bull run. He highlights that despite strong rallies in Chinese stocks in early 2024 and late 2022, foreign investment flows into India did not significantly shift, suggesting that the correlation between the two markets may be less pronounced than previously thought.
The article further explores the historical relationship between foreign investment flows into China and other emerging markets, noting that while a positive correlation exists, it is not a zero-sum game. Koul anticipates some rotation of funds from active managers but does not foresee significant selling of Indian equities by foreign institutional investors (FIIs), as foreign ownership in Indian equities remains low. He advises investors to focus on India's domestic sectors, as the potential impact of China's economic recovery on global demand for commodities remains unclear.
Source: We're far from a bull run in Chinese stocks, says Sunil Koul of Goldman Sachs