Chart of the Day: Investors overweight on India, shows BofA Fund Manager Survey

The sectoral preference is technology, while bond proxies such as real estate and utilities are clearly out of favour.

As 2023 comes to a close, there is a clear reversal in sentiment among equity market participants away from China and in favour of Japan as also India.

A recent Bank of America Fund Manager Survey (FMS) shows that over the next 12-month horizon, a net 45 percent of the FMS investors were overweight on Japan. The optimism on Japan comes after its economy moved into an inflationary trend from deflation. Korea and Taiwan rose into significance with 17 and 15 per cent overweight respectively. Interestingly, India (15 per cent overweight) is also among the top four economies about which investors are optimistic (see chart).

“The risk appetite towards China is shockingly low”, says the Bank of America report, pointing to investors being underweight. Most investors prefer to stay in the wait-and-watch mode or look for opportunities elsewhere as they also believe that the Chinese economy is headed for a structural de-rating.

Yet, investors’ return expectations are bolder and more hopeful of a rise in Asia-Pacific ex-Japan equities over the next 12 months. This should come on the back of stronger profits. The US Federal Reserve’s signal of a possible pivot in 2024 underscores moderation in interest rates over time that can aid corporate profitability and an expansion in earnings.  Talking of sectoral preferences, the preference is technology, while bond proxies such as real estate and utilities are clearly out of favour.