EM funds remain underweight on India in January, Korea holds marginal overweight

Relative allocations to India rose by 0.1 percentage points from December, though positioning over recent months has reflected a gradual decline.

• Emerging market funds stayed underweight on India in January
• India and Hong Kong/China saw allocations below benchmark weights
• South Korea kept a slight overweight position in EM funds

Did our AI summary help?

Emerging market funds continued to remain underweight on India in January, even as allocations saw a marginal month-on-month increase, according to a Nomura report tracking positioning across major EM Asian markets.

India’s allocation stood 2 percentage points below benchmark weights in January. As of end-January, 62 percent of funds in the sample were underweight on India, compared with 57 percent in the previous month. Relative allocations to India rose by 0.1 percentage points from December, though positioning over recent months has reflected a gradual decline.

Hong Kong/China equities also remained underweight, with allocations 1.4 percentage points below benchmark levels. Around 54 percent of funds were underweight, compared with 30 percent that were overweight. Allocations to Hong Kong/China increased by 0.2 percentage points month-on-month in January, extending the improvement seen in recent months.

In contrast, South Korea retained a slight overweight position, with allocations 0.1 percentage points above benchmark weights. Allocations to Korea were unchanged from December, with 49 percent of funds overweight and 47 percent underweight.

Nomura said the analysis is based on a bottom-up review of a sample of large global EM funds to assess shifts in EM Asia equity positioning. Among the larger EM Asian markets, India and Hong Kong/China continue to record the largest underweights, while Korea maintains a marginal overweight stance.

Beyond Asia, EM funds generally remained overweight on Indonesia and smaller Latin American markets, with Saudi Arabia an exception. Relative to the MSCI EM benchmark, January allocations increased by 0.2 percentage points for Hong Kong/China and by 0.1 percentage points each for India and Brazil. Allocations declined by 0.1 percentage points on Indonesia, Saudi Arabia and South Africa, while positioning in Korea and Mexico remained largely unchanged compared with December, the report added.