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India has overtaken China as the most attractive emerging market for investing for sovereign wealth funds in 2023 due to its solid demographics, political stability and proactive regulation, a report said on Monday.
The Invesco Global Sovereign Asset Management report has captured the views of 142 chief investment officers, heads of asset classes, and senior portfolio strategists from 85 sovereign wealth funds and 57 central banks. Collectively, these institutions manage about $21 trillion in assets.
As per the report, India is a better story now in terms of business and political stability. In addition, fast-growing demographics, good regulation initiatives, and a very friendly environment for sovereign investors are the positives for the country.
“India has now overtaken China as the most attractive emerging market for investing in emerging market debt,” the report stated.
The report noted that 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. This was seen as helping fund current account deficits as well as support currencies and domestic assets including debt.
In addition, India and South Korea continue to be the most attractive destinations for increasing exposure, the report noted. Going by the report, emerging markets offer a range of attractive investment opportunities in both public and private markets.
The report found inflation as the most significant short-term risk to global economic growth. This was followed by rising geopolitical risk, tight monetary policy, supply chain disruptions and impact of climate change on environment as other risks.
Central banks looking to combat yield volatility and inflation risk see gold as a safe-haven asset. This spurred record gold purchases in 2022, a trend prevailing into the first quarter of 2023, it added.
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