Chindonesia (China, India and Indonesia) is home to 40 per cent of the world’s population, around 2.8 billion people, and will add at least 170 million people to its workforce over the next ten years. Despite robust domestic growth and financial discipline, the Chindonesian equity markets could not escape the sell-off triggered by the never-ending eurozone sovereign crisis. Investors are ignoring the strong long term fundamentals and are adopting a short-termist approach.

The recent correction saw valuations drop to levels seen during the troughs of the financial crisis, however, this has provided investors with an attractive entry point to the Chindonesia growth story. The MSCI China’s price-to-book ratio of 1.4x sits below the 2008-2009 lows of 1.6x, and even remains cheap when the troubled banking sector is removed from the equation.

Indian equities are trading at levels witnessed in 2004 which is low, especially after factoring-in a potential loosening of monetary conditions and easing commodity prices. 

Despite the short-term turmoil, Chindonesia’s structural growth drivers will continue to drive the economy, with domestic-focused companies continuing to increase earnings at a double digit pace. The long-term growth story remains intact. Infrastructure investments are still booming while the prospects of the huge middle-class keep improving thanks to labour reforms and rising farmers’ income.

The resulting consumption boom is visible in many industries as goods become more affordable. Additionally, should the private sector require stimulus, Chindonesian policymakers can still rely on healthy public finances to help compensate for falling western demand.