China CSI 300 Index

Hedge funds have been piling into Chinese equities at the fastest pace in months as bullishness on the DeepSeek-driven technology rally adds to hopes for more economic stimulus. In contrast, India suffers a record exodus of cash due to concerns over waning macro growth, slowing corporate earnings, and expensive stock valuations. The switch has seen China’s onshore and offshore equity markets add more than $1.3 trillion in total value in the past month, while India’s market has shrunk by more than $720 billion. The MSCI China Index looks set to outperform its Indian counterpart for a third straight month, the longest streak in two years.

The rotation marks an about-face from the pivot into India seen over the past several years, which lured funds away from China. That pivot was based on India’s infrastructure spending splurge and its potential as an alternative manufacturing hub to China, with Beijing now looking to increase stimulus we’re seeing some clear role reversal. Sentiment is improving toward China, whose shares are still relatively cheap, and the country’s leaders appear keen to work with the country’s entrepreneurs instead of suppressing them as was common in recent years.

• MM believes China has become more attractive than India from a risk-reward basis perspective – the MSCI China Index is trading at just 11x forward earnings estimates, compared with about 21x for the MSCI India Index.

A glance at the indices from both countries shows that investors in India have enjoyed tremendous gains post-COVID, whereas China has delivered losses. We are more bullish toward China than bearish toward India, but the unfolding money flow between both countries could quickly drive the CSI Index to multi-year highs.

• The performance “gap” can narrow significantly between China and India equities through 2025.
• A strong Chinese stock market delivers a bullish read-through on the ASX miners.