India emerges favourite investment destination as China?s outlook moderates
India has become the favourite investment destination, the latest survey report by global financial major Bank of America Merrill Lynch (BofA ML) said on Tuesday.
?As the growth outlook for China moderated this month, Asia Pacific investors cut their allocation to China in half from 30% to 15%… But interestingly, India became the most favorite market since April 2010,? the report released on Tuesday said.
The turnaround comes at a time when both the benchmark indices ? Sensex and Nifty ? have gained more than 20% and figure among the best performers in the current calendar year (CY12). Foreign institutional investors (FIIs) have also invested over $18 billion in Indian shares.
Interestingly, the bullish stance on India is accompanied with China allocations being cut by almost 50%.
Among other emerging markets, the outlook for Australia deteriorated to a four-month low (net 29% investors are underweight). Similarly, investors turned optimistic on Thailand after more than four years on the back of a 22% rally in the equity market in CY12.
According to the survey, while fund managers raised their equity and commodity allocations in October, it was not accompanied with any kind of euphoria.
?Nevertheless, global fund managers finally raised their EM (emerging market) exposure this month ? a net 32% reported overweight allocations, the highest level since May (and back above the long-term average of +26%),? said the report. Among sectors, technology remained the consensus call among investors in Asia-Pacific (net 59% overweight). ?In October, investors became more defensive and rotated into sectors such as healthcare (28%), telecom (26%), and utilities (11%), said the report.
Meanwhile, fund managers rotated out of beta by sharply reducing their allocation to autos (from 50% to 12%) and industrials (from 40% to 12%). Unlike GEM investors, Asia Pacific investors remain underweight financials (both banks and insurance), added the report. Incidentally, financials makes up 25% of the market cap for the MSCI EM index, so investor sentiment on the sector is critical.
