Statsguru: How India fares in stock mkt metrics after overtaking Hong Kong

Hong Kong lost its place as the fourth largest stock market to India last week, albeit temporarily.

India’s market capitalisation on January 22 was $4.33 trillion, compared to Hong Kong’s $4.29 trillion. The subsequent day saw a reversal. The narrowing gap between the two markets, to a large extent, was driven by Hong Kong’s decline led by a rout in Chinese companies, which has caused it to lose nearly $3 trillion in market capitalisation over the last few years. China’s economic woes and tensions with the West are playing out on Hong Kong’s bourses (chart 1).

Investors were willing to buy Hong Kong-listed shares at 21 times their earnings in March 2019. This price-to-earnings ratio fell to under 15 by the end of 2023, contributing to the decline. India’s own price-to-earnings ratio has risen from 24 to 28.5 in the same period (chart 2).

Indian companies were valued at nearly four times their assets at the end of 2023. Hong Kong companies traded at less than the value of the assets they held. China has also seen a similar contraction in its price-to-book ratio (chart 3).

Foreign investors have flocked to India. It attracted more money than the US in 2023. There is limited data on China, but reports suggest even long-term investors like pension funds are exiting (chart 4).

India has increased its share in global markets amid China’s troubles. India accounted for nearly 4 per cent of the total market capitalisation of the world by the end of 2023. This is twice what it was a decade ago (chart 5).

Indian companies have taken advantage of the situation. India’s share of the global initial public offering market hit a multi-year high of 6 per cent in 2023 (chart 6).