Angelina Lai, Chief Investment Officer for Asia and the Middle East at St. James’s Place, discusses opportunities in emerging markets. She shares her views on Indian and Chinese equities, highlighting areas of potential growth amid market volatility and shifting valuations.

Beijing

Recent analysis indicates that India has seen increased investor interest due to governance reforms and the professionalization of company management, particularly among larger firms. However, India's market remains expensive compared to its historical averages, and many family-owned businesses still lack transparency and formal governance structures.

In contrast, China's market offers attractive valuations, especially in A and H shares, despite ongoing regulatory and structural challenges. While China's economy has grown steadily, its stock market performance has been relatively flat, highlighting a disconnect between economic growth and market returns. Experts suggest a selective approach to investing in both markets, focusing on companies with strong value propositions.

India vs China: Valuation meets volatility in emerging markets

So quite interestingly, two to three years ago, we certainly have been much more interested in India. We saw at the time of perhaps coming through the beginning of a market reform, where there's a lot more governments employing professional managers to manage companies for traditionally market, sorry, family-owned businesses. And we've certainly seen that sort of hike and quite a lot of interest within the India market over the last few years. Now again, coming back to our anchor, which is valuations, we do find India, perhaps amongst the rest of the Asia-Pacific market, the more expensive compared to its historical... Still. Still, yes. Because it hasn't really particularly come down. It's been less in terms of the increase this year, in terms of the boom in the market, but it still has been growing sort of steadily. Now from the other moderator perspective, economically we see support. We see governance and reforms that's helping and supporting, certainly as a tailwind for the India market. We see there not being significant extreme tailwinds, however I think we think that there could still be some way to go in terms of the governance reforms. The larger caps tend to have gone through some of that professional employment of managers, but there's still quite a large amount of family owned businesses where you don't get as much of the transparency and the formality that comes with the professionally run companies. Do you feel differently about China? We've got about one or two minutes to go here, but investors will be scrutinizing the post fourth plenum readout for policy signals. This is medium term, so it should get your attention. What are you going to be looking out for and how do you feel about China markets right now? So again, let's start with valuations. Valuation is definitely very, very attractive, whether it's A shares or H shares market. Now some of that probably have, particularly in the Asian market, probably have pricing, some of the Trump tit for tat tariff wars, and whereas the H share market likely to be more sensitive to some of these with a more global investor base. Having said that, we do believe there are still a lot of regulatory ahead when there's still structural ahead when we think that the Chinese government is quite cognizant of what's going on around those and it's taking a medium to long term view in trying to fix some of these structural issues. Having said that, China market looking back at the last 30 years, the economy has been growing steadily at on average 5 to 6%, however the market has been more or less flat. So it's a very interesting case study of where the market slightly dislocates from the economic growth. Nonetheless, certainly coming back to our frameworks, valuation is extremely attractive. We think that the policies are supportive in the mid to long term, and therefore we do currently believe in being very selective in good value companies.

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