Tuesday, December 11, 2007

China v India the Past 2 Months

I mentioned in an entry in mid October how Indian stocks seemed to be getting very little attention

I am always amazed to see how the ratio of Chinese to Indian financial stories is in a ratio of 20:1 - when you have 2 economies of similar scope, size, and strength - yet one seems to get all the attention. Perhaps it is due in part to the fact that there are very few ways of directly investing in India via ADRs where there are many more Chinese avenues.

With all the attention on Chinese small cap stocks racing hundreds of % for no good reason, and the first trillion dollar company, PetroChina (PTR) [Petrochina the 1 Trillion Dollar Company? Is *this* the Top]. it just seemed way too frothy, so I decided to focus more on India instead of China [Buying a Bucket of India]

I decided to look back since that focus on India vs China (October 15/16) and see how investments in the 2 countries have compared since my Indian stocks have been rip roaring of late. I am using iShares Xinhau China 25 (FXI) as the proxy for China since this is the easiest way for US investors to buy an 'index', and using the India Fund (IFN) which is what I use as my index for India.

It is hard to read the chart from afar (click on it to enlarge), but the 2 month chart above starts on October 11th through yesterday's close. Using October 16th as a start point, India Fund [tan line] has returned +24% and iShares Xinhau China 25 [black line] -6%, so a variance of +30%. Every so often you nail these....

(as an aside iPath MSCI India (INP) has done even better than IFN - returning 39% since October 16th, but part of that could be due to some structural issues the instrument)

At this point I think the move here in the Indian stocks are a bit overextended, and if not for the fact Chinese large caps are STILL extremely highly valued compared to similar peers in US, I'd be getting more constructive on China. (reversing the call in mid October) Well that and the fact Shanghai is in a bubble and food inflation is roaring there.

Pork prices surged 56 percent in November from a year earlier, driven by a shortage of pigs. Food makes up a third of the consumer price index and rising costs pose a threat to social stability, illustrated by a stampede last month at a cooking-oil sale that killed three people in the central city of Chongqing. Overall, food climbed 18.2 percent.

However this shows clearly that not all 'emerging markets' move together... while both countries were hit by the US correction in November, the Chinese index has made a begrudging recovery whereas the Indian stocks have made a slingshot bounce.

Long India Fund in fund; no personal position

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