India’s stock market has achieved a significant milestone, surpassing Hong Kong to become the seventh largest stock market in the world. This achievement reflects growing optimism about India’s economic prospects and signals a shift in the global investment landscape. As of the end of November, the National Stock Exchange of India recorded a total market capitalization of $3.989 trillion, edging ahead of Hong Kong’s $3.984 trillion, according to data from the World Federation of Exchanges.
The Nifty 50 index in India has recently reached another record high, showcasing the country’s robust stock market performance. So far this year, the index has surged by nearly 16%, on track for its eighth consecutive year of gains. This impressive growth stands in stark contrast to Hong Kong’s benchmark Hang Seng index, which has experienced an 18% decline during the same period. India has emerged as a standout market in the Asia-Pacific region, attracting increased liquidity, domestic participation, and favorable global macro dynamics, such as falling U.S. Treasury yields.
India’s position as an attractive investment destination is further strengthened by its approaching general elections, which are predicted to result in another victory for the ruling nationalist Bharatiya Janata Party (BJP). Opinion polls and recent state elections suggest a decisive win for the incumbent government, potentially triggering a bull run in the first few months of the year due to expectations of policy continuity. HSBC strategists have identified sectors such as banks, healthcare, and energy as the best positioned for next year. Additionally, sectors such as autos, retailers, real estate, and telecoms are expected to thrive in the long term, whereas fast-moving consumer goods, utilities, and chemicals could face challenges.
In contrast to India’s success, Hong Kong’s Hang Seng index has experienced a continuous decline, marking its fourth year of negative performance. Moody’s recent downgrade of Hong Kong’s outlook from stable to negative highlights the city’s financial, political, institutional, and economic ties to mainland China as significant concerns. China’s own outlook was also downgraded by Moody’s, further exacerbating the challenges faced by Hong Kong. The city’s government has trimmed its GDP growth outlook for 2023, citing increasing geopolitical tensions, tight financial conditions, and a decline in investment, exports, and consumption sentiment. These factors have also contributed to a plunge in consumer confidence.
China, as the world’s second-largest economy, has set a growth target of 5% for 2023. The country’s third-quarter GDP growth came in at 4.9%, raising hopes that it will meet or even exceed expectations. China’s economic performance is crucial for Hong Kong’s recovery, as a revival of mainland tourism will fortify the retail and catering sectors.
India’s achievement of surpassing Hong Kong’s stock market value signifies the country’s promising economic prospects and growing investor confidence. With factors such as political stability, impending general elections, and favorable sector outlooks, India is poised for continued growth. On the other hand, Hong Kong faces numerous challenges, including its ties to mainland China, declining consumer confidence, and economic downgrades. As global attention shifts towards India’s rising stock market, it will be interesting to observe how both economies develop and whether Hong Kong can regain its position in the future.