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INCH Strategy (INCH market set to overtake US by 2020):
China’s stock market has not moved in tandem with the pace of economic growth. Currently, China’s market cap is only 64% of its GDP—about half the proportion at the peak reached in 2007, and lower than world average of 82%. The corresponding ratios for India, ASEAN 6 and the US are all back above 100%. In this period, the combined market cap of INCH (India and China) has grown from 6% of US market cap to 34%. By 2020, we expect China’s market cap will reach US$19.6tn (5.3x the current level) and India will reach US$6.1tn (4.0x the current level). The US market, we reckon, would have risen only 1.4x, to US$21.6tn. This means that by 2020, INCH market cap would be 20% higher than the US.
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