Invest In China Through Options Without Too Much Risk, Says Matt Orton

One can invest in China via options, and not take too much risk, said Matt Orton, chief market strategist at Raymond James Investment Management. He also advised investors to find other ways to get involved in the optimism around China, rather than a direct investment, since the market is incredibly volatile.

On China's recently announced stimulus, Orton said the markets really need clarity with respect to how big the fiscal stimulus is going to be. "More importantly, is China willing to run a larger fiscal deficit than what it traditionally adhered to, which is around 3% fiscal deficit, in order to dig themselves out of this significant saving-consumption imbalance that they have? We're going to need to the tune of 5% of fiscal deficit and we’re just not getting it," he said.

This uncertainty has contributed to volatility in Chinese equities, which has Orton categorising investments in China as short-term trades rather than long-term commitments.

In contrast, India is a long-term investment opportunity, according to him. He pointed out a significant trade-off between India and China, with foreign investments in India witnessing a relentless influx in recent weeks. Investors seem to be moving away from China as they become more aware of its volatility, he noted. As enthusiasm for Chinese equities wanes—particularly if expected fiscal stimulus fails to materialise—investors will likely redirect their funds toward markets with stronger fundamentals, like India, he said.

Several Indian companies showcase solid growth potential, according to Orton, including ICICI Bank Ltd. and Mahindra & Mahindra Ltd.

ICICI Bank, with its diverse consumer demographic and strong earnings growth, presents a compelling case for long-term investment. While, Mahindra & Mahindra offers exposure to both the automotive sector and the broader Indian infrastructure growth narrative.

Orton noted the ongoing shifts in foreign investment strategies, with many investors reassessing their allocations amid global market uncertainties. While some may have previously favoured Chinese equities, he anticipates a reallocation back toward long-term investment stories in emerging markets, particularly India.

As global market conditions evolve, Orton encouraged investors to focus on quality and sustainability in their portfolios. "India continues to be my largest overweight position outside of the US," he said as he sees the country's long-term growth prospects remaining strong.