To The Moon

I confessed.

If there is any worse time to invest in Chinese stocks, it would be now.

Why?

(1)  Geopolitically, China has choppy relationships with several countries (descending severity):

• United States.

• Taiwan.

• Japan.

• ASEAN countries - The Philippines and Vietnam.

(2)  Domestically, after many rounds of internal bashings - home-grown MNCs have been sufficiently subdued & drained of their resources (after many rounds of penalty fines) and too “weak” (owners stepped down, sidelined) to compete internationally.

This is necessary (to whom i wonder) to ensure MNCs toll the line and do not have the will to revolt again.

(3)  Victim of extreme pandemic management. The fallacy of zero-infection & extreme lockdown measures employment (over extended period) to achieve the “failed goal”, has damaged domestic economy.

It’s been 6 months since restrictions have been lifted but still everything is “not” back to normal.

Evidences of a weak economy with weak supply & weak demand

• Exports fell -7.5% (YoY) in May 2023 (YoY) versus Reuters’ expectation poll of -0.4% decline.

• May 2023 imports fell by -4.5% (YoY) versus Reuters’s forecast of -8% decline.

• According to Capital Economics, Hd of China Economics, Mr Julian Evans-Pritchard, “May decline was so sharp that export volumes are below their levels at start of 2023, after accounting for seasonality and changes in export prices”.

Producer Price Index has plunged for May 2023, its worse in 7 years

China's falling PPI since Jan 2023

• China’s Producer price index (PPI) for May fell -4.6%.

• It is the steepest (YoY) drop in 7 years.

• May’s decline is a continuation from April’s PPI of -3.6% decline.

• In fact, its PPI has been falling since Jan, 2023.

• Last time when PPI had fallen massively by -7.2% (YoY) was back in May 2016.

• It’s 2023 economy is “weak”.

2023 - Top 10 most populous countries

Across the imaginary border lies India - China’s frenemy.

It has overtaken China as the most populous country in the world (see above).

More importantly, India is a “not” a greying society/country unlike China, US, Japan etc. It has a thriving young population.

Therein lies the “miracle” on the “future & infinite possibilities” of India, when there is constant renewal.

I think there’s no need to extoll the benefits of having a “critical mass” and all the accompanying consequential benefits.

What Other “Strengths”?

1. Its relationship with US is stronger than ever as the latter tries very hard to muscle India to be its ally.

2. India benefitted from its relationship with Russia, with cheap oil powering its economy.

3. India is nibbling at China’s manufacturing pie, as US companies pivot from the world’s favourite manufacturing base. $Apple(AAPL)$ is a good example. India will continue to gain traction as long as the China’s tension with US persists.

4. It wields sufficient political and economic clout to be included as part of G20 founding members.

5. India is a founding member of BRICS as well, where its original goal was to establish an equitable, democratic and multi-polar world order. Of late, BRICS has become politically motivated. Their latest endeavour is to weaken US influence and the old-world money, US dollars (see below).

India is “smart” to navigate successfully and avoided all confrontations without lifting a finger or taking sides about Russia’s invasion of Ukraine.

Its “neutral” stance has benefitted the country while it remains under the auspice of democracy.

Is this what statesmanship being all about?

Agree with the news article.

It has rightly pointed out that India will be the bright sparks in the coming years; especially when ties between US and China never mends.

In its latest global economic outlook report, OECD predicted India followed by China would top gross domestic product (GDP) projections for 2023 & 2024 (see below).

GDP projections - India #1 and China #2

What Stock?

If I were to invest in Indian stocks, it would have to be in Banking as it is an essential lifeline for any country economy.

After preliminary research, let’s take a look at $HDFC Bank(HDB)$

• An Indian banking and financial services company, incorporated in 1994 and headquartered in Mumbai, India.

• It was listed on the New York Stock Exchange (NYSE) on 20 July 2001.

• It is India's largest private sector bank by assets.

• As of April 2021, it is the world's 10th largest bank by market capitalization.

• On India Stock Exchange, it ranks #3, third largest company by market capitalization of $120.505 Billion.

• As of 31 March 2023, the bank's distribution network was at 7,821 branches across 3,203 cities.

• It is the 15th largest employer in India with nearly 150,000 employees.

• Its top 5 international shareholders includes $JPMorgan Chase(JPM)$ , $Morgan Stanley(MS)$ and even $SCHRODER INC.(SCF.UK)$ . (see below). Although the investment is not “huge” but it is telling, no?

HDFC Bank's - Top institutional holders

HDFC Bank's historical EPS

Banks Stock Price Movement (Past 1 Year)

• Its past one year stock price has gained about +11.52%.

• Bank also issues dividends of $0.70 cents per share (1.07%).

These are some preliminary facts & figures that I have come across in my research. Will have to do a deeper dive to ensure the bank’s pedigree.

Let’s not forget every investment opportunity, has its accompanying risk too.

Case in point, the Hindenburg report on India’s conglomerate Adani Group seemed to hold waters (on the surface) because there was hardly any legal action taken against the Hindenburg Research company.

• Do you think that there are more upsides to India versus China?

• Do you think you would start your homework on Indian companies and take a leap of fate at the right time?

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