New Delhi, Nov 20 (NationPress) India's market valuations present an attractive opportunity when compared to Chinese equities. Currently, India holds the title of being the largest underweight in Global Emerging Market (GEM) portfolios within the Asia region, with merely a quarter of the monitored funds exhibiting overweight positions, according to a report released on Thursday.

Despite the robust interest surrounding the region's AI supply chain—particularly in markets like Taiwan and South Korea—Asia's equity landscape is gearing up for a shift towards markets that provide broader value and clearer earnings visibility, with India emerging as a key player.

HSBC Global Research stated in its report, "India is the largest underweight in GEM portfolios; only 25% of the funds we analyze are overweight in India. Given the recent underperformance, we believe India's valuations present a better opportunity compared to Chinese equities."

The report indicates that Indian earnings are anticipated to recover significantly, bolstered by widening bank margins, falling interest rates, and increased consumer spending. Sectors driven by consumer demand, such as automobiles, are set to gain from reduced borrowing costs and possible GST adjustments.

Moreover, Indonesia is highlighted as another emerging market likely to attract investor interest.

Government policy support is on the rise, and monetary conditions are expected to become more lenient by 2026. The report suggests a potential earnings rebound in Indonesia, with consensus growth estimates improving from 7% in 2025 to 11% in 2026.

On the other hand, investor sentiment in mainland China has seen an upturn in 2025, resulting in a boost in valuation multiples.

However, further growth will rely on companies meeting their earnings expectations, currently predicted at 16% EPS growth in 2026, as indicated in the report.

A significant portion of this growth is dependent on revitalizing consumer spending, which remains a crucial topic but has yet to see substantial support from policy measures.

The report also points out the dividend potential in Asia.

Over the past two decades, dividends in this region have more than doubled, yet the payout ratios remain among the lowest worldwide.

HSBC's analysts remarked, "This indicates substantial room for improvement. Korea's government-led 'Value Up' initiative has encouraged companies to adopt more shareholder-friendly practices, while entities in China and Singapore have also begun increasing their distributions. Notably, Indonesia is leading the region in enhancing payout ratios," the report noted.

While AI continues to dominate discussions in global markets, investor exposure in Asia—particularly in Taiwan and Korea—is nearing capacity, with the average regional portfolio allocating approximately 10% to a single stock, TSMC.

This concentration risk, coupled with the cyclical nature of previous tech booms, is likely to steer investors toward more diversified regional themes in 2026.

HSBC maintains a positive outlook on Hong Kong, India, and Indonesia, while it holds underweight positions in Taiwan, Korea, Japan, Singapore, and Thailand.