India Vs. China: J.P. Morgan’s Banker To The Rich Picks The Former


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Oct. 27 2010 – 6:16 pm | 2,785 views | 1 recommendation | 2 comments
The Bombay Stock Exchange, in Mumbai, is Asia'... The Bombay Stock Exchange 

Michael Cembalest, Chief Investment Officer at J.P. Morgan Private Banking, might like India just a little bit more than China.

It’s not an unfounded preference. Since it began its market reforms, India has outperformed China. Year-to-date India’s equity market has seen a return of 22% while Shenzen has been -3%, over 10 years the Sensex saw 19% to China’s 10% and since 1993 the Sensex retuns at 12% are still ahead of Shenzen’s 9%. Of the 13 managers on his platform who invest in emerging or Asian equities, 10 are overweight India, a winning strategy this year, he says, given India’s out performance versus most developed and developing equity markets.

In his Oct 26 Eye On the Market investment letter, he lists his reasons:

– Better corporate profitability: Profit margins compare favorably with other developed and developing countries. Companies in India are more exposed to market forces than in China, which may explain the superior margin results.

– India’s equity capital markets are more developed than China’s: India ranks in the top 10 globally in terms of equity market issuance, with three times the number of public companies as in China. There is greater exposure to the private sector as 75% of the investible market cap in India is made up of privately run companies, compared to 18% in China.

That said, it’s much harder to operate in India than in China, without a doubt on all matters ranging from economic stability and infrastructure to rule of law, innovation and business sophistication. But despite it all, the proof is in the pudding.

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