Fund managers preferring India over Japan, China for equity exposure: BofA survey

According to the latest Fund Manager Survey (FMS) by BofA Securities, India has emerged as the most preferred equity market in the Asia Pacific region.

With huge infrastructure development, strong consumption trends, and ongoing supply chain realignments, Indian equities have overtaken Japan to secure the top spot among fund managers.

Details from the survey by BofA Securities

A net 42 per cent of respondents in the BofA Securities’ May survey favoured India over other Asia Pacific markets. Japan, which held the top spot until now, slipped to second place at 39 per cent, while China, which had previously ranked lowest, climbed to third place with 6 per cent preference. Singapore trailed at 3 per cent, and Thailand remained the least favoured market in Asia.

“Infrastructure and consumption continue to be the primary themes that investors are keenly monitoring,” BofA noted.

In Japan, banks continue to be the most preferred investment theme, supported by higher interest rates. Its real estate market has climbed to the second spot in terms of sectoral preference. 

Meanwhile, in China, investors favoured themes around AI, semiconductors, and companies likely to announce buybacks or dividends.

While a net 59% of respondents still expect a weaker global economy, indicating a major improvement from last month’s bleakest-ever 82%. The Asian outlook is warming up too, with 77% anticipating weakness, compared to 89% previously.

A net 58% of fund managers foresee an earnings slowdown, down from a grim 78% a month ago. Meanwhile, consensus earnings estimates across Asia aren’t flashing red but leaving room for upward revisions if economic momentum improves.

The BofA survey comes after leading capital markets and investment group, CLSA, said India's safe haven status is at risk amid easing trade tensions between the U.S. and China and improving regional geopolitics.

CLSA noted that India had become a relative outperformer and a “hiding place” for investors in the wake of heightened global trade tensions and India-Pakistan border conflicts.

“The rise in these fears made India a hiding place and second-best performing market since March,” the brokerage said.

However, with a China-U.S. deal now reducing fears of a trade war, the brokerage cautioned that “it may reduce the relative attractiveness in India,” CLSA said, pointing to the risk of relative underperformance if flows begin rotating back into Chinese equities.

However, with fund managers keeping tabs on infrastructure and consumption as key themes, and broader regional sentiment improving, Indian equities appear well-positioned to attract sustained institutional flows in the coming months.

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