May 31, 2017 10:00 pm JST

India now more dynamic than China, indexes suggest

Nikkei Asia300 Index indicate divergence to continue

If regional stock indexes are any indication, India is now more dynamic than China. The Nikkei Asia300 Index for India on May 30 showed a gain of 21.6% from December, when The Nikkei launched the Nikkei Asia300 Index to track the share prices of the 325 most influential companies in 11 Asian economies. During that span, the index for India out-gained the overall Nikkei Asia300 Index. The index for China, meanwhile, lagged the overall index, growing 14.2%.

One of India's largest conglomerate Reliance Industries and the nation's largest automaker Maruti Suzuki India have been particularly dynamic. Both companies posted record profits in the year to March and are set to expand their operations even further this fiscal year.

Reliance Industries posted a record consolidated net profit of 299 billion rupees ($4.63 billion). That is a gain of 19% when you exclude profit on sale of businesses, which grew by just 1% compared to the previous fiscal year, and other special factors.

The conglomerate's main petroleum-related businesses have benefited from growing domestic demand and rising prices for petroleum products. And its retail businesses have posted huge gains in revenues and profits, supported by healthy domestic consumption and the aggressive addition of stores.

Also contributing to revenues, albeit on a limited scale, was the company's entrance into the market for wireless phone services in September 2016. Using low prices as a weapon, the company expanded rapidly in this sector, signing up 109 million subscribers as of March.

In the Indian automotive sector, Maruti Suzuki continues to drive in the fast lane. The subsidiary of Japan's Suzuki Motor posted its third straight year of record unit sales and net profit in the year to March, with car sales (including exports) rising some 10% to 1.57 million units and unconsolidated net profit growing 37% to 73.4 billion rupees.

Meanwhile, China's part of the Nikkei Asia300 Index rose by just 14.2% between Dec. 1 and May 26, underperforming the basket of 325 companies that comprise the total index.

The main drags were the Chinese banks with their huge market capitalizations, and the real estate sector, held in check by simmering anxieties over government measures to control the property bubble.

Market capitalization has grown by only a single digit for all four of China's largest banks, including the Industrial and Commercial Bank of China (ICBC) and Bank of China (BOC). Bogged down in the efforts to write off non-performing bank loans, their net profits have stagnated, giving investors little incentive.

Net profit for the ICBC rose by a mere 0.4% in the year to December, and the 1.4% gain during the January-March quarter shows the bank is still moving sideways. But that can be expected, given how it is moving forward with the disposal of bad debt through direct depreciation and other means amid Chinese President Xi Jinping's insistence that the bank avoid financial risk.

Chairman Yi Huiman said the emergence of new bad debt is on the decline at his bank, but the reality is that the bank's outstanding balance of nonperforming loans stood at 215.2 billion yuan as of the end of March, nearly 3.5 billion yuan more than at the end of 2016.

As for stocks in China's real estate sector, market capitalization has plunged by nearly 40% for property developers Greenland Holdings and China Vanke.

There was a property bubble during 2016 and prices have continued to edge higher so far during 2017. That is creating worries that the Chinese government may be getting ready to enact one of its intermittent tightenings of the screws on property selling.

With the rise in office rents in Shanghai also beginning to ease, there is a strong sense of uncertainty about the future of the real estate market.

(Nikkei)

Asia300

Reliance Industries Ltd.

India

Market(Ticker): BOM(500325)
Sector:
Industry:
Energy Minerals
Oil Refining/Marketing
Market cap(USD): 79,771.86M
Shares: 6,332.55M
Asia300

Maruti Suzuki India Ltd.

India

Market(Ticker): BOM(532500)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 36,885.95M
Shares: 302.08M

Suzuki Motor Corp.

Japan

Market(Ticker): TKS(7269)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 26,788.79M
Shares: 491.01M
Asia300

Industrial & Commercial Bank of China Ltd.

China

Market(Ticker): HKG(1398)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 310,968.61M
Shares: 356,406.25M
Asia300

Bank of China Ltd.

China

Market(Ticker): HKG(3988)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 175,561.39M
Shares: 294,387.78M
Asia300

Greenland Holdings Corp. Ltd.

China

Market(Ticker): SHG(600606)
Sector:
Industry:
Finance
Real Estate Development
Market cap(USD): 14,061.17M
Shares: 12,168.15M
Asia300

China Vanke Co., Ltd.

China

Market(Ticker): HKG(2202)
Sector:
Industry:
Finance
Real Estate Development
Market cap(USD): 43,489.48M
Shares: 11,039.15M

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