Whatever Is Movable Is Being Moved From China

Whatever Is Movable Is Being Moved From China
On June 21, 2023, the Shanghai Composite Index fell below the key psychological level of 3,200 points, closing at 3,197.9, essentially returning to its early 2023 state. The image depicts an illustration of the stock market. Mandy Cheng/AFP
Law Ka-chung
Updated:
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Commentary

India’s stock market cap recently became the fifth largest in the world, surpassing Hong Kong’s. This looks unbelievable at first glance, given India’s developing impression to many of us. But even as emerging as Jakarta could have an IPO amount exceeding Hong Kong, then one should seriously rethink something that is changing structurally. More generally, the capital outflow from China and Hong Kong has been crystally clear: All neighbouring stock markets performed well (or not bad) except these two, which were confined to a downtrend.

The accompanying chart compares China and India stock indexes: the two series look commoving, but pay attention that one of them (the China one in red on the left scale) is reversed. The story was not like this prior to 2021. In 2021 and 2022, the two generally moved opposite to each other (so that they look commoving in this chart), but there were still short-term discrepancies observed. From 2023, however, such opposite movements became more tightly correlated, suggesting a much stronger capital relocation from one to another.

Law Ka-chung
Law Ka-chung
Author
Law Ka-chung is a commentator on global macroeconomics and markets. He has been writing numerous newspaper and magazine columns and talking about markets on various TV, radio, and online channels in Hong Kong since 2005. He covers all types of economics and finance topics in the United States, Europe, and Asia, ranging from macroeconomic theories to market outlook for equities, currencies, rates, yields, and commodities. He has been the chief economist and strategist at a Hong Kong branch of the fifth-largest Chinese bank for more than 12 years. He has a Ph.D. in Economics, MSc in Mathematics, and MSc in Astrophysics.
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