‘China’s Bull Run Is Manufactured, But India Is…’: Julius Baer’s Mark Matthews On Tale Of Two Markets

Mark Matthews, Head of Research Asia at Julius Baer, believes investors should see China and India as two very different markets each driven by its own set of fundamentals and opportunities. According to him, both markets can continue to grow in a parallel manner.

While China has recently seen a revival in its stock market, Matthews says this resurgence is largely government-engineered, whereas India’s current underperformance has more to do with foreign investor movements than economic weakness.

According to Matthews, foreign institutional investors (FIIs) have been selling Indian equities, not because they have lost faith in India, but because they are reallocating funds back to China after staying underinvested there for years.

“China is a much larger market, and I think the main reason for India’s recent underperformance is the FII selling,” he told NDTV Profit. He added that this movement towards China is not about dislike for India but more about about repositioning.

However, he pointed out an irony — despite China’s sluggish economy, it currently boasts one of the world’s best-performing stock markets. Matthews believes this is a “manufactured bull market.”

China’s government is engineering a stock market revival, he explained. “They have extremely low interest rates and a housing market that isn’t going to recover soon."

With around $23 trillion of household savings sitting in bank accounts, the government is nudging people towards equities instead.

The goal, Matthews said, is to create a steady, long-lasting bull market rather than a speculative bubble. “They want equity markets to rise gradually — say 10–15% a year — so that people feel wealthier over time," he added. Matthews added that this should help rebuild consumer confidence, which was badly hit during COVID, and eventually support broader economic growth.

At the same time, Matthews emphasised that China’s rise does not come at India’s expense. “The Chinese market will continue to rise — that doesn’t mean India can’t grow too. They are just very different markets.”

On a broader scale, Matthews observed that the world appears to be moving towards a “G2” structure — led by the United States and China. “The term ‘G2’ had been used before, and China didn’t like it. But now they seem more comfortable with it, which shows confidence,” he noted.

He found it particularly significant that China recently issued bonds at the same yields as US Treasuries, calling it “a positive signal.” This, according to Matthews, suggests that emerging markets are maturing, and investors no longer need to worry as much about high risk premiums or currency volatility as they once did.

Looking at the global currency picture, Matthews said that while the US dollar appears weak relative to emerging markets, it may still hold ground against major developed currencies like the euro. The euro has strengthened, but ironically that’s made Europe less competitive, he noted. He further pointed that labour costs are high, and now European carmakers are competing directly with China.

He expects the dollar to lose ground against emerging market currencies, which should act as an important tailwind for emerging market equities.