India appeals more to public pension and sovereign funds than China, according to research by think tank OMFIF.

The organisation’s research draws on contributions from 22 global public funds across the world with combined assets under management of $4.3tn. These include Singapore’s GIC, Canada’s CDPQ, Australia’s Future Fund and India’s National Infrastructure Investment Fund.

Part of the analysis is based on a survey of the investment strategies of 16 funds worth a cumulative $1.7trn.

Close to 40% of the surveyed funds selected India as the most attractive emerging market, higher than any other country.

Less than a quarter selected China (23%), Brazil (23%) or Mexico (15%), while none selected Indonesia, South Africa or other emerging markets.

According to Nikhil Sanghani, managing director for OMFIF’s Economic and Monetary policy Institute, India’s appeal is linked to its strong economic growth potential.

In OMFIF’s GPP report, senior officials at Singaporean wealth fund GIC said Vietnam and India are well-positioned to benefit from the diversification of global supply chains and that countries like India and Indonesia had “ample runway for digitalisation and financial deepening”.

Last year Ontario Teachers’ Pension Plan opened an office in Mumbai and India’s government bonds are due to be added to the JPMorgan Government Bond Index-Emerging Markets benchmark in June 2024.

In contrast to India, there is growing caution on China, said OMFIF’s Sanghani.

“None of the funds in OMFIF’s survey said that they invest in China due to a positive outlook for its economy or an expectation for higher investment returns,” he said. “Rather, 80% invest in China due to its inclusion in benchmark indices.”

He added: “Ultimately, long-term investors such as public pension and sovereign funds seek certainty and it is increasingly difficult to find this in Chinese markets due to domestic and international political factors. Meanwhile, India’s growth potential and increased openness to foreign investment suggests it is becoming the more favoured emerging market for global public investors.”

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