Investor sentiment across Asian markets has shifted sharply in August, reveals the latest Bank of America (BofA) Fund Manager Survey, which found global growth expectations retreating after three months of improvement.
Illustration: Uttam Ghosh
The pullback comes amid deepening concerns over a slowing US labour market, frail consumption, and the impact of tariffs, particularly on Asian economies.
A net 41 per cent of survey respondents now anticipate a weaker global economy, up from 31 per cent last month, while 31 per cent expect weaker growth in Asia, a deterioration from the previous 26 per cent.
Despite this, bullishness persists: 9 out of 10 investors see Asia ex-Japan equities climbing higher over the next year, with forecasts for earnings upgrades remaining strong as consensus estimates are not viewed as overly ambitious.
The biggest turnaround was noted in India. Once the top pick among Asia’s equity markets as recently as May, India has now sunk to the bottom of investor preference lists.
The shift is widely attributed to US President Donald Trump’s announcement of 50 per cent tariffs on Indian goods, a penalty for India’s Russian oil imports, which investors fear will dent corporate earnings and further strain already high market valuations.
As per the latest survey, 30 per cent of fund managers are now underweight on India, more than any other Asian market.
Japan, by contrast, remains the region’s favourite destination, with a net 43 per cent overweight.
Japan’s Nikkei 225 Stock Average hit a fresh all-time high on Tuesday, backed by ongoing corporate reforms, a supportive currency environment, and anticipation of a Bank of Japan rate hike by March 2026.
China jumped to second place, leapfrogging over Taiwan and Korea, as its economic growth outlook reached a five-month high.
Only a net 3 per cent of managers now expect weaker growth in the world’s second-largest economy, down from 10 per cent last month.
Optimism is fuelled by hopes for more policy measures from Beijing to counter persistent deflation and encourage households to deploy record-high savings toward discretionary spending and investments.
Yet, the long-term perspective remains measured, with 60 per cent still predicting a structural de-rating for Chinese equities.
The BofA survey showed a clear preference for growth themes across Asia ex-Japan, with fund managers overweighting sectors such as tech hardware, semiconductors, software, and financial services, while avoiding materials, autos, energy, and real estate.
In China, artificial intelligence continues to be the favoured theme, whereas in India, infrastructure and consumption plays remain top of mind despite the broader market’s fall from grace.
In Japan, banks, as beneficiaries of higher rates, and semiconductor firms receive the most attention.
