India has emerged as the most attractive investment destination among emerging markets in 2023 amid a host of global economic headwinds, including high inflation and interest rates, global investment management firm Invesco said in a report.
According to the Invesco Global Sovereign Asset Management Study, 2023, sovereign wealth funds favour emerging markets, particularly India, given its solid demographics, political stability, and proactive regulation. “We observe an increased affinity for fixed income assets, including private debt, and heightened interest in Emerging Markets, believed to offer potential benefits in a higher-rate environment. Among the Emerging Markets, India has piqued sovereign investors’ interest, overtaking China,” the Invesco report said.
This was its eleventh annual study on sovereign investors. Initiated in 2013, it captures the viewpoints and opinions of chief investment officers, heads of asset classes, and senior portfolio strategists from 85 sovereign wealth funds and 57 central banks. Collectively, Invesco noted these institutions manage approximately USD 21 trillion in assets.
Emerging markets, it said, offer a range of attractive investment opportunities in both public and private markets.
“Investors are focused on economies that offer favourable demographics, political stability, and positive regulatory initiatives, with India a priority,” the report said.
It noted India exemplifies the attributes sought by sovereign investors.
“Viewed increasingly positively for its improved business and political stability, favourable demographics, regulatory initiatives, and a friendly environment for sovereign investors, India has now overtaken China as the most attractive Emerging Market for investing in Emerging Market debt.”
“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,” a development sovereign based in the Middle East was quoted in the report.
India is among a number of countries, including Mexico and Brazil, that are benefitting from increased foreign corporate investment aimed at both domestic and international demand through “friend-shoring” and “near-shoring”.
Besides India, it noted important commodity-producing countries including Brazil and Indonesia, which are seen as well placed for the green transition and electric vehicle revolution, have the potential to become destinations for diversification for sovereigns with more “concentrated commodity revenue streams”.