Chinese stocks are better picks over their Indian peers on relatively better valuations, a senior executive at Merrill Lynch Wealth Management told Reuters in an interview late on Monday. “It’s just a relative call. Indian equities have outperformed year to date…the relative valuations went very high compared to other regional equity markets,” said Stephen Corry, director and chief investment officer, Merrill Lynch Wealth Management, Asia-Pacific region. “I think Indian equities right now are pretty much priced for perfection,” Corry said. Data from Thomson Reuters showed the BSE Sensex traded at 21.5 times its current earnings while China’s Shanghai Composite index traded at 17.2 times. “I think there is a compulsion we are now beginning to start to see people shifting out of India and moving their allocations more in favour of China going forward,” Corry said in an interview with Reuters Insider.
The Sensex has risen 3.4 percent year to date and currently hovers near 30-month highs. It has outperformed its emerging market peers Brazil’s Bovespa and China’s Shanghai Composite Index, which have dropped 2.8 percent and 18.7 percent respectively. Russia’s RTS index is just about in the positive territory in 2010. Corry said the performance of Chinese equities are reflecting the country’s tightening monetary measures, but he now expects China to loosen those policies.
Annual headline inflation in July in India, the world’s second-fastest growing major economy, slowed more than expected to single digits, but the Reserve Bank of India is unlikely to take the foot off the pedal on rate rises as it worries about broader price pressures. Foreign funds have invested a net of $11.6 billion in Indian equities so far in 2010, after a record $17.5 billion in 2009, when Indian stocks rallied 81 percent.