Markets
Is India the Next China? [Chart]
Is India the Next China? [Chart]
The Chart of the Week is a weekly feature in Visual Capitalist on Fridays.
It’s no secret that the most recent bull market in commodities and global growth corresponded with the emergence of China on the world stage. When a country with over 1 billion people can grow at 10% for decades at a time, the power of compound interest starts to add up.
The only problem is that Chinese growth is starting to slow down. To start 2015, the world’s second-biggest economy grew at its slowest pace in six years at a clip of 7.0%, which was down from 7.3% in Q4 2014. Further, the rate of growth in investment, industrial production, and retail sales have been declining consistently over the last four years.
The world is looking for a new China to be the world’s growth engine. Does India fit the bill?
No one is denying that India has the potential to be a game-changer for the global economy. With 1.25 billion people and growing, India will be the most populous country in the world by 2028. The challenge is that the majority of people in the country are terribly poor (GDP per capita of US$1,500) and that the country’s bureaucracy strangles almost and all business endeavours. That said, there are recent economic and bureaucracy reform green shoots that show that India could at least temporarily swing out of its funk.
We did some back of the envelope calculations to see at what rate India would have to grow to be as significant to the world economy as China is today. We looked at India growing at high (10%), medium (7.5%), and low (5%) rates over the coming years. Based on this, India wouldn’t be comparable to today’s China until 21 years, 31 years, or 57 years respectively. (Note: to keep model simple, we had the rest of the world growing at a steady pace of 2%)
The end result shows the staggering power of compound interest: if India grows at a high rate similar to China over the last decades, India could be a world player in the coming decades. If growth is crippled by bureaucracy and it hovers around 5% on average, India won’t become the next China until way in our future: the year 2072.
On the bright side, Brazil may also be a good “bridge” for global growth. China certainly believes so, and that’s why they just announced an investment of $50 billion into the country’s infrastructure projects.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
---|---|---|
EURO STOXX 50 | 14.9 | 2.2 |
STOXX Europe 600 | 14.4 | 2 |
U.S. | 25.9 | 4.7 |
Canada | 16.1 | 1.8 |
Japan | 15.4 | 1.6 |
Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
---|---|---|---|---|---|---|
EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
Canada | 1.00 | 0.22 | 0.40 | |||
Japan | 1.00 | 0.88 | ||||
Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
Index | Description | Market Cap |
---|---|---|
STOXX Europe 600 | Pan-regional, broad market | €10.5T |
STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
-
Economy4 days ago
Economic Growth Forecasts for G7 and BRICS Countries in 2024
The IMF has released its economic growth forecasts for 2024. How do the G7 and BRICS countries compare?
-
Markets2 weeks ago
U.S. Debt Interest Payments Reach $1 Trillion
U.S. debt interest payments have surged past the $1 trillion dollar mark, amid high interest rates and an ever-expanding debt burden.
-
United States2 weeks ago
Ranked: The Largest U.S. Corporations by Number of Employees
We visualized the top U.S. companies by employees, revealing the massive scale of retailers like Walmart, Target, and Home Depot.
-
Markets2 weeks ago
The Top 10 States by Real GDP Growth in 2023
This graphic shows the states with the highest real GDP growth rate in 2023, largely propelled by the oil and gas boom.
-
Markets3 weeks ago
Ranked: The World’s Top Flight Routes, by Revenue
In this graphic, we show the highest earning flight routes globally as air travel continued to rebound in 2023.
-
Markets3 weeks ago
Ranked: The Most Valuable Housing Markets in America
The U.S. residential real estate market is worth a staggering $47.5 trillion. Here are the most valuable housing markets in the country.
-
Lithium6 days ago
Ranked: The Top 10 EV Battery Manufacturers in 2023
-
Green2 weeks ago
Top Countries By Forest Growth Since 2001
-
United States2 weeks ago
Ranked: The Largest U.S. Corporations by Number of Employees
-
Maps2 weeks ago
The Largest Earthquakes in the New York Area (1970-2024)
-
Green2 weeks ago
Ranked: The Countries With the Most Air Pollution in 2023
-
Green2 weeks ago
Ranking the Top 15 Countries by Carbon Tax Revenue
-
Markets2 weeks ago
U.S. Debt Interest Payments Reach $1 Trillion
-
Mining2 weeks ago
Gold vs. S&P 500: Which Has Grown More Over Five Years?