Putting at rest stock market fears global investment banker Merrill Lynch said more money was expected to flow into India and China due to high growth.
MUMBAI: Putting at rest stock market fears that there may be a flight of capital invested by FIIs in the face of Sebi's draft proposal to curb the flow of PNs, global investment banker Merrill Lynch said more money was expected to flow into India and China due to high growth.
The flow of foreign money into Asia remains strong, Merrill Lynch's Investment Strategy Report for Asia Pacific said.
India witnessed USD 6 billion of net foreign buying since the Sub-prime led credit troubles spread to the global stock markets in July, as compared to USD 8 billion flow since January this year.
Pension funds and insurance companies have missed out on the Asian story so far this decade and are facing diminishing returns elsewhere. They are getting interested in Asia and when they do, it will be a large amount of money, the study said.
China and India are still small at just 2.5 per cent of MSCI World Index, while Europe and US are 69.5 per cent. But China and India are the prime growth markets, and often that's what drives valuations rather than size, it said.
The MSCI World Index is a market capitalisation index that is designed to measure global developed market equity performance.
Some of the Indian companies were expensive, Reliance Industries' present valuations were expensive but their execution has been so good, and their cash flow huge at USD 4.3 billion this year and thus, not a bubble when a company that doesn't make money trades at ridiculous valuations, it said.
Merrill Lynch research report on investment strategy says, "Within Asia, India has the second-strongest growth, and the second-largest economy, after China. The two economies complement each other, and given Asian markets are being propelled by top-down factors and not valuations, it is incongruous to remain underweight India while liking China."
At the same time Merrill Lynch has forecast India's return on equity (ROE) to decline this year and next and earnings in last and this quarter are in-line or below consensus, as opposed to the past two years when they were above consensus.
For global money aiming to invest in Asia, India and China are more alluring as they have the largest growth, the biggest economies and the most liquid market as compared to other Asian markets like Taiwan, Korea, Hong Kong and Singapore.
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