China scores over India

Brokerage firms are bullish on China while state that India will underperform in 2009 and much of the bullish case rests on China’s ability to deliver a strong fiscal stimulus. Indeed, despite Morgan Stanley’s rosy outlook for Asia, its report on Indian strategy is titled, 2009: Road to Nowhere. That’s because of the multiple headwinds India faces. As the Morgan Stanley report points out, “To turn the tide, India needs pump priming without the use of public debt, more liquidity on the balance sheet of banks, better relative valuations, earnings downgrades, global calm leading to a better BoP (balance of payments), a good election result to ensure smooth policy action in the coming years and quick corporate restructuring focused on delevering operations to limit the earnings damage.”