India Surpasses Hong Kong, Ranks as Seventh-Largest Stock Market Globally

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India’s stock market has surpassed Hong Kong’s, claiming the seventh spot globally, signaling increasing optimism about India’s economic future. Data from the World Federation of Exchanges reveals that, as of the end of November, the National Stock Exchange of India’s total market capitalization reached $3.989 trillion, slightly edging out Hong Kong’s $3.984 trillion.

India’s Nifty 50 index achieved another record high this Tuesday, exhibiting a remarkable 16% increase year-to-date and on track for its eighth consecutive year of gains. In stark contrast, Hong Kong’s Hang Seng index experienced a 17% decline in the same period.

India has emerged as a standout market in the Asia-Pacific region, benefiting from enhanced liquidity, increased domestic participation, and positive shifts in the global macro environment, including a decline in U.S. Treasury yields.

As India approaches general elections next year, analysts anticipate a potential victory for the ruling Bharatiya Janata Party (BJP), leading to further optimism in the market. HSBC strategists project that a decisive win for the BJP could trigger a bull run in the first few months of the year, driven by expectations of policy continuity.

According to HSBC, sectors such as banks, healthcare, and energy are well-positioned for the coming year. Looking ahead to 2024, autos, retailers, real estate, and telecoms are considered relatively favorable, while fast-moving consumer goods, utilities, and chemicals are categorized as less favorable.

In contrast, Hong Kong faces economic challenges, with the government trimming its GDP growth outlook to 3.2% for 2023, down from the previous forecast of 4-5% in August. Ongoing geopolitical tensions and tight financial conditions are cited as factors affecting investment, exports, and consumer sentiment in Hong Kong.

Economists at DBS predict a soft landing for Hong Kong’s economy in 2024, with annual real GDP growth moderating to around 2%. The recovery is expected to hinge on the revival of mainland tourism, supporting the retail and catering sectors.

While China has set a growth target of 5% for 2023, its third-quarter GDP of 4.9% has raised hopes for meeting or even exceeding these expectations in the world’s second-largest economy.