Japanese Retail Investors Scoop Up Indian Stocks, the 'Second China'

Japanese Individual Investors "India, the Second China"
Concerns Over China's Real Estate Bubble and Deflation

Trillions of yen from Japanese individual investors are flowing into India.

According to data compiled by Bloomberg on the 2nd (local time), the total assets of India equity investment trusts in Japan increased by 237 billion yen (about 2 trillion won) last month.

It is analyzed that the popularity of Indian stock investments among Japanese people has grown even more due to tax-free investment accounts that started this year. In fact, this is the largest increase among developing country stocks held by Japan. The Indian Nifty 50 index was almost flat last month in local currency terms, but due to the depreciation of the Japanese yen, the valuation in yen terms rose by 4.2%.

Japan's Stock Valuation by Country. Unit: 100 Million Yen
[Image Source=Bloomberg]

Aoki Daiju, Regional Chief Investment Officer at Tokyo UBS Sumi Trust Asset Management, said, "India is attracting the attention of Japanese investors as the second China and a theme of economic growth," adding, "Individual investors' interest is more in India as a whole rather than in individual companies."

On the 23rd of last month, the market capitalization of the Indian stock market surpassed Hong Kong in dollar terms for the first time. This made India the third largest economy in Asia and the fourth largest stock market in the world. At the beginning of January, India's Mumbai Stock Exchange (BSE) Sensex index surged 200% compared to February 2016.

On the other hand, inflows into Chinese stocks decreased the most among the 14 emerging markets covered by Japan's international investment position data. This capital movement by Japan, the world's largest creditor nation, is interpreted as a caution against the collapse of the Chinese real estate bubble and deflation. Last month, the Shanghai Composite Index and the Hang Seng Index fell by 3.5% and 5.7% respectively in yen terms. At the beginning of January, the Hong Kong Hang Seng Index dropped to the level of July 1, 1997, when Hong Kong was returned, and has fallen about 50% since its peak in January 2018.

According to a survey of Asian fund managers released by Bank of America (BoA) on the 16th of last month, only 4% of respondents expected China's economy to perform well this year. In contrast, 20% said they would reduce their allocation to Chinese stocks. This is by far the largest reduction in allocation in Asia.

Additionally, economists forecast that India's year-on-year economic growth rate will average over 6% until the second quarter of 2025, while China's economic growth rate is expected to remain below 5%. The United Nations, through its demographic report, projected that India's population will increase by 17% by 2050, while China's population will decrease by 7.9%.

This content was produced with the assistance of AI translation services.