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China, India stocks reveal secrets of the real economy

December 6, 2012

inchin stocks

Exactly a week ago, on the 29th of November, India’s Sensex hit a 52 week high, on the same day, China’s Shanghai Composite hit a 52 week low, losing 3.8 percent of the market and cementing its future as the worst performing Asian index .

A week later, both indexes are once again riding high, with Shanghai’s composite redeeming itself with a 3 percent jump on speculation that leaders will unveil an agenda for the next year at the forthcoming Central Economic Work Conference.

With clouds of concern over Europe and the US, Foreign Institutional Investors are once again buoyant on the fastest developing Asian markets. The increased liquidity in the markets also rides on the back of higher purchasing managers indexes which were announced last week. China’s PMI rose to 50.6 in November, the highest reading in seven months, according to the National Bureau of Statistics  while India’s PMI jumped to 53.7 from 52.9 in October. A reading above 50 indicates expansion and below 50 implies contraction.

Year end projections of  potential growth in both economies is what is attributed to in the hike in stock prices. According to analysts, a new government in China and increased output growth, albeit constrained by poor infrastructure in India is what is propelling investors to stay put in both China and India. A long term view upheld, both China and India are basking in the sunlight, enjoying the spoils of a gloomy western hemisphere.

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