Markets were driven down by concerns over China’s economic growth and market volatility, as well as anticipation of the US interest rate hike that didn’t happen.
“[During Q3] the flip in the noise from positive China to negative China has hammered the whole region in terms of equity indices,” wrote Mark Tinker, head of Framlington Equities Asia, in a research note.
India, a lesser loser
During the period, India, the US, Europe and emerging markets were all in positive territory until mid-August, FE data shows. By the end of the quarter, all major indices were negative, but India didn’t fall as far as the other regions (-4.42%).
Several reasons are behind India’s comparatively better performance.
India is a domestic consumption-led economy today, while China is trying to get there, said Gaurav Sinha, asset allocation strategist at Wisdom Tree.
India has roughly 60% consumption-expenditure-to-GDP ratio compared to about 39% for China. The data “indicates an economic model hugely influenced by local consumption, providing potentially better insulation from global headwinds.”
Alex Wolf, EM economist at Standard Life Investments, agreed that India is comparatively less exposed than other emerging markets to the weakness in global trade. It also has less exposure to China than other EMs and the government, which subsidies oil, has been benefitting from lower oil prices.
But he cautioned that India’s exports and domestic demand are not immune to the weakness in the external environment.
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Funds from Pinebridge, JP Morgan and First State accounted for the top three performing India funds during the problematic Q3:
