Will the market keep rising? Will the Nifty hit 30,000 in the near future? Who’s to say! If anyone tells you they can predict where the market is going, they are lying through very thick teeth. The truth is: no one does. And the sooner you accept that, the best.

However, investing isn’t about wagering on index levels. That’s speculation. And if you wish to indulge in that and have the resources for it, sure go ahead.

Investors, however, need to be a little more mindful of what businesses they are buying into and the prices they are paying for them. And here a world view offers a great deal of perspective.

Last week hedge fund manager David Tepper’s view of buying “everything” in China on CNBC caught people’s imagination. More so, because the argument makes a lot of sense. Here’s why.

CHINA IS CHEAP

Given its several problems in the recent past and the geopolitical developments, China has seen a significant loss of interest among investors. Some of this has benefited India, with our country gaining share in global indices.

And while some of the issues plaguing China are not going to vanish in a jiffy, China’s recent stimulus move has made it clear that the world’s 2nd largest economy with $3.3 trillion of forex reserves is intent on putting its economy back on track.

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Imagine what that can mean if it does. That’s a bet some are willing to make, as the risks are low as stocks are going cheap. China is perhaps the only large market trading below its 5-year average price to earnings (PE).

Going Cheap
Country	Cheap vs 5 Yr Avg PE
China	11.49
Brazil	8.59
Argentina	12.5
Chile	12.11
Colombia	6.01
Mexico	12.44
Sweden	15.77
Poland	10.91
Spain	10.14
Norway	11.64
Thailand	18.81
Indonesia	12.82
New Zealand	25.83

Source: WorldPEratio

China and Brazil are two markets of a significant size that are presently trading at discounts to their 5-year average PEs. While China trades at 11.5x, Brazil trades at a single digit PE of just 8.6x. Compare that with PE ratios of some better performing markets like India and the US and the difference is extremely stark.

World Valuations
Country	Index PE ratio
India	27.73
US	25.99
Australia	22.9
France	19.6
Canada	18.61
Japan	17.59
UK	16.97
Germany	16.09
Italy	11.85
China	11.49
Brazil	8.59

Source: WorldPEratio

While India tops the pecking order with a PE of 27.7x, the US trades at 26x. Even Japan is trading at 17.6x. Of course, one needs to factor in growth rates and that justifies some of the premium, but the gap in valuations today is really wide, especially for a market like China.

This, especially since China is clearly the 2nd largest equity market by market capitalisation in the world. This even after India’s record outperformance.

Markets by Size
Country	Mcap (Sep 2024) $mn
US	57418699
China	8905083
Japan	6818336
Hong Kong	5414502
India	4952239
UK	3342995
Canada	3253170
Germany	2543824
Taiwan	2274905
South Korea	1893572
Australia	1776223
Brazil	784849
Singapore	452013

Source:Macromicro.me

A look at the Buffett indicator makes this disparity look even more stark.

True, market capitalisation captures only the listed universe of an economy, nevertheless, the big gap is hard to ignore.

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While US’ market cap to GDP ratio stands at 198%, the same for India is at 126%. Taiwan, interestingly, given that semiconductors are the flavour of the season is at 296%. But China is at a low 48%.

Markets and Economy
Country	Mcap/GDP (Sep 2024)
US	197.88
Taiwan	295.84
UK	95.64
Germany	55.41
Japan	165.88
South Korea	107.53
Singapore	86.06
India	125.79
China	48.05

Source:Macromicro.me

TIME FOR RATIONALITY

Given the global landscape, Indian equities clearly look primely valued and it makes sense to lighten up but not completely exit as money flows can cause irrational moves for extended periods.

Hence, a passive strategy for equities with a lesser allocation would make sense at this point even as a higher share apportioned to debt to ride the rate cut cycle would be prudent.

And even if you prefer equities, be more picky about what you buy with a clear eye on value.

Happy investing!