Emerging market equities have traded lower in recent weeks. That indicates this is among the small amount of asset classes that didn’t like the outcome of the U.S. presidential election. Both China and India stocks are among the offenders.
For the 20 days ending November 15, the MSCI China and MSCI India indexes were off an average of 3.5%. Some of that slump is likely attributable to market participants remembering that when President-elect Trump previously held that office, he frequently aimed harsh rhetoric at China. Still, it cannot be ignored that during his first four years in office, the MSCI China Index surged 94.1%.
History isn’t guaranteed to repeat. And for the Trump sequel, some analysts believe India stocks will be better bets than China equivalents. That indicates ETFs like the WisdomTree India Earnings Fund (EPI ) and the WisdomTree India Hedged Equity Fund (INDH ) merit inclusion on investors’ watch lists.
Time to Investigate India ETFs
One of the primary reasons some market participants are apprehensive about China stocks and more bullish on India equities ahead of the second Trump term is the belief that if the president-elect touches off a trade war, China, not India, will incur the most pain.
It remains to be seen if that happens or not. But EPI and INDH could be somewhat buffered. That’s because while India has its strong export story. But exports are the primary source of GDP growth in China, as noted by CLSA. The research firm added that India stocks could outperform China counterparts. That’s because China’s recent stimulus efforts could prove ineffective at propping up its economy.
In what could be a positive for ETFs such as EPI and INDH, among developing Asia countries, CLSA views India as the least exposed to potentially adverse consequences of Trump trade policies. The research firm added that at a time of dollar strength, India’s rupee could prove to be one of the more stable emerging market currencies.
India's Equity Market Sell-Off Dichotomy
CLSA also noted that India stocks remain somewhat expensive relative to the broader emerging market space. But valuations have become a bit more tolerable following a recent pullback.
Interestingly, there’s a dichotomy in the recent India equity market sell-off. Foreign professional investors have been the most dedicated sellers. And local institutional investors and some retail market participants used the declines to add to positions.
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