Trump 2.0: Brokerage Firm CLSA Reverses Tactical Shift To China; Becomes 20% Overweight On India

Amid the exodus of Foreign Institutional Investors (FIIs) from Indian markets over the past few weeks, brokerage firm CLSA has reversed its earlier strategic move and said that it 'reverse its tactical allocation in early October, returning to a benchmark on China and 20 per cent overweight on India'.

Noting that 'misfortune happens in three', CLSA, in its latest note said that India appears as 'among the least exposed markets' to Trump's adverse trade policy.

"...Investors we met this year have been waiting specifically for such a buying opportunity to address Indian underexposure. Domestic appetite remains strong, offsetting foreign jitters and valuation, though pricey, is now a little more palatable," CLSA said in its latest note. “The initial reaction was to rent rather than buy the rally, ⁠yet we committed funds at the start of October by tactically deploying some of our over-exposure on India to China,” the CLSA note drafted by Alexander Redman and Wei Sheng Wan said.

Here are some observations of the CLSA report

• Misfortune can happen in threes. So it has played out for the Chinese equities over the past week. Trump 2.0 heralds a trade war escalation just as exports become the largest contributor to China's growth.
• We are anxious that these concerns lead to a buyers' strike by offshore investors who built China exposure post the initial PBOC (People's Bank of China) stimulus in September.
• India has seen strong net foreign selling since October, while investors we met this year have been waiting especially for such a buying opportunity to address Indian underexposure.
• Domestic appetite remains strong, offsetting foreign jitters and valuation, though pricey, is a little more palatable.