India has overtaken China as the most attractive emerging market for investing, according to a report titled ‘Invesco Global Sovereign Asset Management Study’
The report included views from 142 chief investment officers, heads of asset classes, and senior portfolio strategists from 85 sovereign wealth funds and 57 central banks.
According to the report by Invesco, India is becoming increasingly perceived favourably due to its increased commercial and political stability, advantageous demographics, regulatory reforms, and welcoming climate for sovereign investors.
“Among the Emerging Markets,India has piqued sovereign investors’ interest, overtaking China.” the report said.
The report also stated how sovereign investors look to India as a model of the qualities they want. Positive perceptions stem from the country’s rising economic and political stability, good demographics, and regulatory actions, as well as its welcoming atmosphere towards sovereign investors, it said.
“India exemplifies the attributes sought by sovereign investors. India has now overtaken China as the most attractive Emerging Market for investing in Emerging Market debt. India is among a number of countries, including Mexico and Brazil, that are benefiting from increased foreign corporate investment aimed at both domestic and international demand through ‘friend-shoring’ and ‘near-shoring’.” according to the report.
A development sovereign based in the Middle East noted, “We don’t have enough exposure to India or China. However, India is a better story now in terms of business and political stability. Demographics are growing fast, and they also have interesting companies, good regulation initiatives, and a very friendly environment for sovereign investors.”
India and South Korea topped the list as the most attractive emerging markets for expanding operations. One central bank in the West said they were considering a greater investment in EM debt, with an emphasis on real estate, infrastructure, and other varied industries.
The report also stated that several emerging markets (EMs), such as Brazil, saw an increase in their perceived attractiveness for fixed-income investments. This was largely due to expectations that these markets would successfully combat inflation and transition from a period of tightening monetary policy to one of easing.
Short-term risks to global economic growth identified by the Invesco report included inflation, supply chain disruptions, geopolitical risks, and the impact of climate change on the environment.