The latest stimulus measures announced by China to revive its economy are unlikely to spook Indian equities this time around due to the nature of the latest measures and changes in international trade environment, according to experts.
“This time it is more to do with substitution of debt, rather than getting new money into economy for productive capacity creating. The markets expected something more than that,” said UR Bhat, co-founder of Alphaniti Fintech.
“What is more noteworthy is what is Trump going to do in terms of tariff. If huge tariff barriers are built, I don’t think those problems can be solved by (this) stimulus package,” he added.
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On Friday, China unveiled a 10 trillion yuan ($ 1.4 trillion) programme to help resolve its local government debt crisis, in a bid to shore up its slowing economy.
China’s previous stimulus measure in late September had led to a sharp inflow of foreign money into its equity market at the expense of India and other emerging markets.
The foreign portfolio investors (FPIs) sold Rs 91,933 crore ($10.9 billion) in India in October — the highest ever monthly outflow recorded from Indian equities. However, experts do not see a repeat of such aggressive sell-off as a result of the latest measures.
Dhiraj Relli, MD and CEO of HDFC Securities, expects the current pace of FPI outflows to moderate in the next few weeks.
“It does not address China’s deep-rooted structural issues, such as its property woes, which are far from fixed. China’s debt-to-GDP ratio climbed to a record 287.8% last year, and recent measures will add to its debt burden,” Relli said.
“A stimulus is good to perk-up the economy. But whether that sustains is a big question mark? It needs domestic consumption to continue increasing and the international environment to be conducive for exports to grow,” said Ambareesh Baliga, an independent market analyst.
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“Looking at what has happened in the US with Trump being elected, it is not clear how conducive international environment would be,” Baliga said.
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