by Patrick Fearon-Hernandez, CFA | PDF
In a bizarre confrontation last month, Chinese and Indian soldiers fought a pitched battle in near total darkness high up in the Himalayan mountains. If that wasn’t strange enough, the weapons used were merely fists, stones, police batons, and wooden clubs wrapped in barbed wire or studded with nails. At least 20 of the Indian soldiers died, many after falling down steep mountain ravines or freezing to death in the cold. An unknown number of Chinese troops also died. In spite of the primitive weapons used and the relatively small number of casualties, the skirmish created a major crisis and risk of war between Asia’s two nuclear behemoths.
In this report, we explain how the confrontation came about and why it was waged in such a primitive way. More importantly, we examine the tensions building between China and India and how the skirmish could cause them to spiral out of control. We also outline how things could develop from here and the likely ramifications for investors.
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by Patrick Fearon-Hernandez, CFA
Since coming to power in 2014, Indian Prime Minister Narendra Modi has shown a penchant for using surprise to launch new policies. In 2016, for example, his government announced a sudden replacement of large-denomination bank notes to fight crime and curtail the shadow economy. Modi’s latest shocker came early last month, when his government suddenly announced that the northern state of Jammu and Kashmir would no longer have the special autonomy it has enjoyed since India’s independence from Britain in 1947. Like the cash reform, officials couched the Kashmir initiative as economic policy – as a way to encourage more development in the region. However, its main impact is likely to be political and strategic. Indeed, it even has the potential to eventually prompt a military confrontation between India and Pakistan, pitting two nuclear powers against each other. That complication makes the situation a real “sweater.” Thus, it makes sense to examine the move in greater detail and discuss what it says about the evolving geopolitical environment. As always, we will also discuss the investment implications of the move.
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