India stock allocations hit 2-year low amid guarded China optimism: BofA Asia fund manager survey

In its latest Asia Fund Manager Survey, BoFA Securities noted that support for Indian equities, an erstwhile market favorite, continued to dwindle, with allocations collapsing to a two-year low. China, on the other hand, witnessed a guarded optimism, riding on artificial intelligence (AI) and semiconductor theme.  

A total of 19 per cent of the fund managers in the survey were 'underweight' on Indian stocks, the foreign brokerage said. Japan, Taiwan and China remained funds' top 'overweights'. A total of 54 per cent of respondents were overweight on Japan, 14 per cent on Taiwan and 8 per cent on China. Sentiments were weakest on Thailand, with 22 per cent participants suggesting 'underweight' positions.  

"Japan comes out on top, yet again, as economic and market outlook for the region hit record highs, with Taiwan a distant second. Allocations to China rebounded after falling sharply last month, while support for Indian equities, an erstwhile market favorite, continues to dwindle with allocations collapsing to a two-year low," BoFA Securities said.

The foreign brokerage said while investors are essentially unmoved in their reservations about China's economy, they are slowly embracing risks with the preference for AI/Semis theme shooting up to a survey-high. 

A third of participants seek to build China exposure on incremental signs of easing, with fewer investors looking to cut risks on bounces. 

"There is a marked improvement in the LT proposition with structural de-rating views near the second-lowest reading in two years, with signs emerging that households may start to spend and invest rather than stash the cash in their savings account," BoFA Securities said.

APAC ex-Japan growth expectations has stabilised after hitting the second-weakest level in two years, with net 8 per cent of participants seeing a stronger economy 12 months out versus net 3 per cent seeing a weaker economy in the previous two months, BofA Securities said. 

"The growth outlook gap with the global economy also showed signs of reversal after falling to the lowest level since August-2021, as investors find respite in the postponement of tariffs, sustained easing outside US, and China's stabilization efforts," it said.