Renowned global brokerage firm CLSA has said that the Indian stock market is better than that of China. In a report released on Thursday, February 13, CLSA announced that it has withdrawn its earlier advice of strategic allocation in the Chinese stock market and has adopted a 20% overweight stance on India. CLSA believes that the global trade war may intensify during the new term of US President Donald Trump, which may have a negative impact on China's economy.
Triple challenge for China
In its new report titled "Pouncing Tiger, Prevaricating Dragon," CLSA said three major problems remain for China's economy.
1. Trump's trade policies: Donald Trump's new term in the US may again intensify the trade war against China. This will be detrimental for it as China's economy is currently most dependent on exports.
2. Limited government stimulus measures: The Chinese government has recently announced several stimulus plans to revive its economy. But these plans focus only on risk mitigation and do not appear to have enough potential to revive economic growth.
3. Interest rate impact: Rising interest rates and inflation expectations in the US may prevent the Federal Reserve and the People's Bank of China (PBOC) from lowering interest rates, making economic recovery difficult for China.
CLSA expressed concern that due to these reasons, the interest of foreign investors in China may decrease. Especially the interest of those investors may decrease who had invested there after the announcement of China's first incentive measures in September 2024.
Invested in China after China's first stimulus measures. For this reason, CLSA has reversed its strategic allocation decision of October 2024 and advised to reduce China investment and refocus on India.
India will get benefit
CLSA said that India does not face any special threat from Trump's trade policies, due to which it remains in the strongest position among all emerging markets. According to CLSA, India is among those countries that will be least affected by Trump's tariff policies. Apart from this, buying by domestic investors in India remains strong, which is balancing the impact of selling by foreign investors.
CLSA also said that foreign investors have sold heavily in India in the last few months, but since the beginning of 2025, many foreign investors are looking for new investment opportunities. CLSA said that initially it considered the boom in Chinese stocks as a temporary boom and adopted a short-term investment strategy rather than a long-term investment. However, in October 2024, CLSA had advised to shift investment from India to China, but now it has reversed it.
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