5 minute read

According to the latest Fund Manager Survey from the Bank of America, India has claimed the top spot as the most preferred equity market in Asia. 42% of fund managers now favour India, placing it ahead of Japan at 39% and China at 6%.

It’s a big turnaround – just a few months ago, India slipped to the second-least favoured market in Asia. After months of selling, foreign investors turned net buyers in mid-April – on 24 April alone, the Indian stock market saw US$345 million in inflows. The rally has added approximately US$489 billion to India's market value, pushing it close to the US$4.4 trillion mark.

Why India, and why now? For one, India's domestically-driven economy and low reliance on exports make it less vulnerable to trade disruptions. It’s also in position to benefit from global tariffs: Apple reportedly plans to shift assembly of US-bound iPhones to India as early as 2026. Plus, the country’s young population and rapidly expanding middle class point to a powerful growth trajectory over the longer term.

As with any country, however, India's market comes with its own share of challenges: Indian equities are still relatively pricey and tensions with neighbouring Pakistan remain. If you're interested in investing in India, our Flexible Portfolios let you easily customise your exposures.

💡 Investors’ Corner: What America's new credit score means for investors

Uncle Sam just took a ratings jab to the chin. Moody's is now the third major credit rating agency to downgrade the US, following Fitch in 2023 and S&P back in 2011. While the country's new "Aa1" rating is still solid, it's a reminder that even the world's largest economy isn't immune to fiscal scrutiny.

What’s going on?

Moody's downgrade highlights concerns about America's fiscal discipline, or rather, the lack thereof. This comes just as US lawmakers are tabling a tax cut package that critics say could add trillions more to the federal debt. It’s a bit like applying for a new credit card while the debt collectors are at the door.

The US national debt currently stands at a staggering US$36 trillion, equivalent to about US$106,100 for each person in the country. Moody's projects that federal interest payments are likely to eat away at 30% of government revenue by 2035.

After the news, 30-year US government bond yields spiked above 5% – meaning there was a sell-off – and stocks ended lower. While credit ratings matter for most borrowers, the US enjoys a unique advantage because of the dollar’s role as the world's reserve currency. But that advantage isn't bulletproof, and markets are pricing in some genuine concerns.

What's the takeaway here?

If confidence in America's fiscal management erodes, the dollar might weaken and inflation expectations could rise. That, in turn, would push the US Federal Reserve to keep interest rates higher – putting even more strain on government finances. This scenario hasn’t come to pass, but as long-term investors, it’s something worth keeping an eye on.

While US assets will continue to play a central role in global portfolios, exposure to other markets protects against the concentrated risk from any single country’s challenges. If you’re looking for a ready-made global portfolio, check out General Investing.

🎓 Simply Finance: Credit ratings

Credit ratings are like financial report cards for governments and companies. They signal how likely a borrower is to pay back their debts, with agencies like Moody's, S&P, and Fitch assigning grades. These ratings influence borrowing costs – better ratings mean lower interest rates.