India and China

Indian economic growth may rebound in 2013 while falling short of the government’s 8% target, as inflation risks limit the extent interest rates can be lowered to spur consumption and investment.
Gross domestic product in Asia’s third largest economy will rise 6.5% in the year through March 2014, according to the median of 30 estimates in a survey by Bloomberg News. That compares with a 10-year average of 7.8% and the Finance Ministry’s projection of 5.7% to 5.9% in 2012-2013.

Prime Minister Manmohan Singh revived stalled policy overhauls in September to stem a slowdown in expansion, steps that helped send stocks to a two-year high this week on bets that a recovery has begun. While inflation eased to a three-year low of 7.18% in December, it remains the fastest among the biggest emerging markets. A record current account gap is threatening to damp the rupee, adding to price pressures. We continue to see higher prices ahead for Indian equities, although a pullback from the recent highs would be wise for an entry with new money.

India and China, India and China

China’s economy is showing signs of a rebound that could help it emerge from its worst economic period in 13 years. According to the latest government figures, growth picked up to almost 8% in the final three months of 2012, from less than 7.5% in the previous quarter. This was driven by state investment in infrastructure projects and efforts to get consumers and companies to spend. Economic stability is seen as vital for China as its new leaders take over. Similar to India, we see a strong uptrend since the summer of 2012. In contrast to India, Chinese equities has overcome their previous highs set in February of 2012. We expect this trend to continue, but for any new money allocations, we would wait for a pullback to create a ‘higher low’ on the chart.

India and China, India and China