US corporate market capitalization, 48.1% of the world’s, highest in 20 years
The market capitalization of China halved from 20% to 10%
Among the top 500 companies by market cap, 236 American companies
Chinese companies decreased drastically from 80 to 35
Pulled-out funds from China flow into Indian companies
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The global concentration of funds in the United States is intensifying to the highest level in 20 years, and funds are moving from China to India.
As of the 2nd, the market capitalization of US companies increased by $1.4 trillion compared to the end of 2023, reaching $51 trillion. The proportion of the world’s market capitalization has risen 1.6 points to 48.1%, the highest since September 2003, according to a report by the Nihon Keizai Shimbun (Nikkei) on the 6th, citing data from corporate information company Quick Factset.
◇ US company’s market cap is 48.1% of the world’s… highest in 20 years… Chinese company’s market cap is slashed in half to 10% for the first time in 9 years
The poor performance of Chinese companies highly contributed to the concentration of global capital in the United States.
The market capitalization of Chinese companies, including Hong Kong, has fallen by $1.7 trillion since the beginning of the year. As a result, the global share of the Chinese company market cap has almost halved to about 10%, even though in June 2015, analysts expected China’s economic growth to be about 20%.
The Nikkei assessed that the difference in market capitalization between the US and China is the largest since data collection began in 2001.
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◇ US tech companies hit record market cap… Chinese tech companies plummet in market cap rankings
The widening gap in market capitalization between US and Chinese companies is mainly due to the performance of tech companies. The total market cap of Amazon and Meta, which announced strong earnings last week, has surged by $510 billion compared to the beginning of the year.
On the other hand, the total market cap of Chinese Alibaba Group and Tencent has been decreasing, with a decrease of $31 billion during the same period. Alibaba and Tencent, due to the expected growth of the platform companies in the vast market of 1.4 billion population, were included in the portfolios of investors around the world, recording 7th and 9th in the world’s market cap at the end of 2020. However, as of the 2nd, Tencent has fallen to 26th, and Alibaba has fallen outside the top 30.
◇ 236 US companies among the top 500 in global market cap… Chinese companies plunged from 80 to 35 in three years
The gap between the US and China is also reflected in the rankings of the top 500 companies by global market cap. Among the top 500 companies, 236 US companies are a 15% increase compared to the end of 2020 (206 companies). In contrast, Chinese companies have decreased by 60%, from 80 to 35. Search engine Baidu, e-commerce company Jingdong (JD.com), and electric vehicle (EV) company Shanghai Weilai (NIO) have fallen out of the top 500.
The growth of US tech companies is continuing: Alphabet (Google’s parent company) recorded the highest quarterly sales and net profit in its recent settlement due to the strong performance in the internet advertising business, and Microsoft (MS) is competing for 1st and 2nd in market cap with Apple due to growth in areas such as artificial intelligence (AI) and cloud computing services.
However, Chinese tech companies are reviewing growth strategies regarding the economic downturn. Reportedly, Alibaba is considering selling assets in consumer-related sectors like Hema Xiansheng.
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◇ US strengthens its lead in AI development competition… China’s advanced semiconductor manufacturing “desperate” due to semiconductor export restrictions
According to Nikkei, strengthened US dominance in the AI development competition is also why investors prefer US tech companies.
US Nvidia, which almost exclusively supplies AI chips for creation, has shown its market cap skyrocket, moving from 23rd to 6th in the world in three years.
The US administration banned the export of advanced semiconductors to China in October 2022, citing the threat to national security from the Chinese government’s military use of civilian technology. Subsequently, they included low-spec AI chips in the regulation and are considering expanding it to general-purpose chips. As a result, Chinese companies like Tencent can’t purchase Nvidia chips, putting them at a disadvantage in competition with US companies.
China is facing challenges in its quest to develop advanced semiconductor chips. The US administration’s regulations have prevented China from importing advanced semiconductor manufacturing equipment from US Applied Materials and the Netherlands ASML. According to assessments, this has left Chinese companies almost desperate to manufacture advanced semiconductors in the short to medium term. These issues have resulted in a sharp 25% drop in market cap for China’s largest semiconductor company, SMIC (Zhongxin International), since the beginning of this year.
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◇ The Chinese government put curbs on expansion of tech companies… US Capital, zero investment in Chinese stocks for the first time in a global growth fund
The Chinese government’s efforts to restrain the expansion of domestic tech companies, such as the announcement of a draft internet game regulation at the end of 2023, are also working against them.
US Barron Capital’s flagship fund, which operates global growth stocks, investment hitherto reduced in Chinese stocks to zero for the first time since the fund’s operation in 2012, down from about 30% in the fourth quarter of 2023. The fund manager explained the background as “considering the regulations under the Xi Jinping regime and geopolitical issues.”
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◇ Defund from China investing in Indian companies… The number of Indian companies among the top 500 in global market cap doubles in three years
According to Nikkei, investors are turning to India as an alternative to Chinese stocks for high-growth investments.
The number of Indian companies among the top 500 in the global market cap has more than doubled to 21 from 10 at the end of 2020. Investors are buying stocks of domestically related companies such as state-owned India Life Insurance (LIC) due to expectations of population growth and income increase.
The number of Japanese companies among the top 500 in global market cap was almost the same, from 32 at the end of 2020 to 31 as of the 2nd, and the global ranking of Samsung Electronics’ market cap dropped from 11th to 21st during the same period.
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