India and Japan Stock Markets Surge
Recently, global stock markets have been exceptionally vibrant, with major indices from the Nasdaq to Nikkei, and even in India, reaching historic highs. Even the Pakistani stock market is keeping pace. Yet, here we are with the A-shares, still hovering below the 3000-point mark, leaving one in disbelief.
Particularly striking is the Indian stock market, which has surged past the 80,000-point milestone, leaving its 200 million shareholders in awe. Japan's stock market is likewise nearing historic peaks. This disparity inevitably prompts reflection: why is there such a gap in our stock market's performance? What exactly is going on?
India's stock market breaks new ground
India's stock market is truly on fire, with the SENSEX 30 index surging past the 80,000-point threshold on July 4, hitting a new high of 80,389.02 points.
This is not merely a numerical victory; it is a resounding testament to India's economic growth and market stability. Such achievements compel global investors to shift their gaze towards this burgeoning market.
But what is driving the explosive growth of the Indian stock market?
The vitality and strength exhibited by the Indian economy are indeed striking. It is especially noteworthy that in the fourth quarter of 2023, India experienced a robust year-on-year GDP growth of 8.4%, a remarkable pace that stands out globally.
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In addition to this impressive economic performance, India has made significant strides in regulating its securities markets.
The stringent delisting rules and clear regulations regarding share reductions have effectively safeguarded the healthy, stable functioning of the market, thereby bolstering investor confidence in its future outlook.
<pFurthermore, from the perspective of capital flows, in recent years, the Indian stock market has attracted considerable attention from individual investors and international capital.
Take large banks like HDFC as an example: although the proportion of foreign shareholding has declined, their weight in the MSCI Emerging Markets Index has increased, directly propelling stock prices higher.
While it appears prosperous now, the Indian stock market faces significant challenges ahead, such as global economic fluctuations and certain domestic structural issues, including inflation and employment market pressures.
However, opportunities and challenges invariably coexist, and the vibrancy of the Indian economy and the market's potential remain substantial.
Turning our attention to China's stock market, although it currently seems somewhat sluggish, it is not devoid of opportunities. Just as the Indian market is driven by its top 30 leading companies, we too can focus on promising leading enterprises.
Investing in the stock market does not mean every stock will rise, nor should one invest in every stock. The key lies in identifying those fields and companies with genuine growth potential.
<pIndeed, global trends are increasingly reflecting this, where the rise of leading stocks often indicates the direction of the entire market. <pThus, while we may envy the surging Indian stock market, we must also recognize that each market has its own rules and opportunities.
Japan’s stock market is also thriving
Recently, the performance of the Japanese stock market is indeed striking, with both the Nikkei 225 and TOPIX indices hitting new highs. Especially the Nikkei, which surged to 40,975 points—such a performance stands out significantly within global markets.
TOPIX is not to be outdone, soaring to 2,898 points, surpassing the peak during the bubble economy of 1989. This trend makes one believe that the Japanese stock market is determined to soar.
However, it is somewhat unexpected for the Japanese stock market to strengthen amidst a continually depreciating yen. Generally, currency depreciation leads to capital outflow, suppressing stock market performance.
Yet, the Japanese stock market defies the trend. What is going on?
Many listed companies in Japan, particularly heavyweight exporters, greatly benefit from the yen's depreciation. With reduced costs and enhanced competitiveness, profits naturally rise.
The Bank of Japan has not only maintained low-interest rates for a prolonged period but has also sporadically purchased stocks, sending a stable signal to the market.
Additionally, the government has introduced a series of reform measures to encourage companies to enhance efficiency, improve governance structures, and bolster attraction for investors.
However, the continuous depreciation of the yen is a double-edged sword for the economy. On one hand, it indeed boosts the competitiveness of Japanese products in the international market, supporting exports and corporate profits.
Therefore, while the Japanese stock market is currently thriving, its future trajectory remains fraught with uncertainty. Investors, while enjoying the benefits of the rising market, should remain vigilant to potential risks.
Today’s stock market has left many feeling exhausted, even hopeless. Investors are voicing complaints, with many choosing to exit, not to mention those who have fought the market for years and ultimately decided to give up.
There is a prevalent sentiment: being a “financial consumer” is too arduous, and some would rather lie flat and enjoy simpler pleasures than endure the trials of the stock market.
Furthermore, examining the international landscape—trade barriers and technological restrictions are piling up—does indeed make the situation for the A-shares even more challenging.
Recently, the EU imposed tariffs on Chinese electric vehicles, delivering a significant blow to the domestic automotive industry.
Although negotiations are ongoing between China and the EU, which might alleviate the situation, this has increased market uncertainty. Electric vehicle companies aiming for a stake in the global market must overcome these external challenges.
However, the issues faced by A-shares are not solely due to external pressures. There are considerable internal problems as well, such as a slowdown in economic growth and a sluggish consumer market.
<pAdditionally, the surge in IPOs over the past few years has led to an influx of companies with subpar quality in the market, which is detrimental to healthy market development.
The current valuation of the A-share market is indeed among the lowest globally, indicating a significant potential for future upside.
If there is an improvement in both the internal and external environments—such as a renewal of vigor in the domestic economy or a thawing in international trade—the A-share market could very well experience a rebound.
The most critical question for us is: how long might it take for us to successfully emerge from the current trough?
By observing the historical trends of other countries' stock markets, it is evident that financial cycles are typically prolonged endeavors.
For instance, the U.S. stock market underwent a long horizontal adjustment from 2001 to 2009; similarly, the Japanese market entered a bear phase in 1989, not witnessing recovery until 2009.
Given these trends, if we apply the same standards to the mainland China's stock market, then the A-shares may still be on a long road ahead.
Thus, for us investors, patience is indeed required. The stock market is perpetually cyclical, presenting both challenges and opportunities.
As for young investors born in the 80s and 90s, it does raise a realistic concern: will they still be around for the next bull market? Time does not wait for anyone, and the fluctuations of the stock market must be closely considered in conjunction with personal life plans.
Nevertheless, understanding the workings of the market, maintaining a calm demeanor, and discovering a personal investment strategy are the keys to surviving within the stock market.
Ultimately, regardless of how the market changes, maintaining an optimistic outlook and wisely allocating investments in life might be the most crucial matters. After all, while money is never-ending, the quality of life and mental state are what we should truly invest in.
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