India has overtaken China to become the most attractive emerging market for invest in, a study by Invesco Global Sovereign Asset Management stated. The report included views from 142 chief investment officers, heads of asset classes along with senior portfolio strategists from 85 sovereign wealth funds and 57 central banks.
According to a development sovereign based in Middle East, India is now a ‘better story’ when it comes to business and political stability. The fast growing demography, good regulation initiatives, friendly environment for sovereign investors among others.
The report said that India is among countries including Mexico and Brazil which benefit from increased foreign corporate investment aimed at domestic and international demand.
The report added that several emerging markets witnessing an increase in perceived fixed-income attractiveness, including Brazil were expected to overcome inflation and eventually stop tightening and start easing monetary policy.
“At the same time important commodity countries including Brazil and Indonesia were seen as well placed for the green transition and electric vehicle revolution, and thus potentially an important source of diversification for sovereigns with more commodity revenue streams”, the Invesco report added.
Gold and emerging bonds
According to the report, more than 85 per cent of the 85 sovereign wealth funds and 57 central banks noted that inflation will be higher in the coming decade. In such a situation, gold and emerging market bonds are being seen as good bets. This shift may have been triggered due to the freezing of almost half of Russia’s $640 billion of gold and forex reserves by the West in response to the Ukraine invasion.
The survey showed a “substantial share” of central banks were concerned by the precedent that had been set. Almost 60% of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020.
