The major bank HSBC raises its recommendation for Indian equities to overweight from neutral, while Chinese equities are downgraded to neutral from overweight. Investing reports.
The upgrade to India is justified by more attractive valuations following several years of weak performance compared with other emerging markets. HSBC also highlights strong credit growth, stable corporate earnings and a resilient economy despite higher interest rates and oil prices. Only 22 percent of global emerging-market funds are overweight India.
HSBC primarily prefers banks, industrial companies and consumer discretionary, but also sees opportunities in insurance and healthcare. High energy prices and inflation are identified as risks.
The downgrade of China is justified by weak consumer confidence, continued problems in the property sector and subdued investment. At the same time, the bank sees limited potential for a lasting rerating of Chinese equities.
