Bond, equity funds, US greenfield investments move away from China to India: OECD
CHENNAI: Since 2020, bond and equity funds have been divesting from China and increasingly investing in India, finds a report by OECD. Greenfield investments by the US also have been increasingly moving towards India from China.
Between 2020 and 2024, there has been a divestment away from China by both bond and equity funds and redirection towards India. Since 2022, investment funds have been divesting from China equity more significantly than over the preceding biennium. As funds have to reallocate any divestment from one emerging market to another, there is evidence of gains towards India, Chinese Taipei, Mexico and Korean stocks, while in bond markets, India has shown most gains.
A major trend in recent years in Emerging Market equity indices has been the growing index weight of India and the decreasing weight of China. China’s weight decreased from close to 40 per cent in 2021 to around 25 per cent in 2024, while India doubled its weight from 9 to 18 per cent over the same period.
As far as greenfield investments by the US are concerned, India in particular has become a prominent recipient, with 15-20 per cent more investment post-2018. The increase in the US greenfield investments going to India corresponds to the decrease in GI for China, without large changes for other emerging Asian countries. In contrast, China has increased its investment position in other surrounding countries, most markedly in Vietnam, Thailand and Cambodia, and decreased the share destined for India.
For the larger EA economies like India and China, the majority of assets under management (AUM) are held by country-specific funds, followed by Global Emerging Market funds, Global and Regional funds. In India, 60 per cent are country-specific funds, 5 per cent regional funds, 19 per cent global emerging market funds and 13 per cent global funds.
Emerging Asian economies like India, Thailand and Philippines, while amongst the top 10 destinations of Emerging Market equity fund investments in green companies, lag far behind the amounts invested in China and Chinese Taipei.
