South Korean interest surges in India’s booming bond market
The surging popularity of India’s flourishing bond market has transcended borders, attracting keen interest from South Korean investors. In a noteworthy development, Mirae Asset Management Co.’s bond fund dedicated to Indian debt has experienced a significant upswing, growing from 24 billion won to approximately 32 billion won ($22.5 million) since the end of last year. This surge can be attributed to the first net inflow in about three years, according to Kim Jin Ha, head of the global fixed income division at the South Korean money manager.
“The public is growing more interested in India, unlike the past when only a few institutional investors showed interest,” stated Kim in a recent interview. He revealed that this year alone, he has engaged with eight securities firms and banks catering to local retail investors who expressed inquiries about India’s bond market, a noteworthy shift compared to virtually no interest in 2023.
While the spotlight has often been on India and US stocks, the recent rally to record highs has occurred against the backdrop of a still-emerging recovery in Chinese equities. Notably, even Japan’s traditionally US-inclined retail investors are now turning their attention to India, which boasts the fastest growth rate among major economies.
“The hottest topic is certainly the US these days, but outside of US assets, India is gaining attention as an alternative to China,” remarked Cho Jae Sung, general manager of Shinhan Bank’s Seoyeouido branch in Seoul. This burgeoning interest is primarily from those seeking funds and better returns.
The shift in focus towards India comes at a time when China grapples with ongoing economic challenges. India’s sovereign bonds are also set to be added to JPMorgan Chase & Co.’s global debt indexes from June, a move expected to attract up to $30 billion in inflows. This figure surpasses the current size of Indian sovereign bonds held by foreigners, according to Kim, who added that the stable currency of India further enhances its appeal.
The rupee, Asia’s top performer this year, has appreciated by 0.4% against the dollar, showcasing the lowest volatility among emerging market currencies. In contrast, the South Korean won has weakened by 3.2% during the same period.
Kim, who has managed the India fund since 2013, expressed a preference for investing in rupee bonds issued by supranational organizations, constituting 40% of the fund. The remaining allocation includes debt from the nation’s state companies, treasuries, and currency. With the prospect of the Federal Reserve cutting rates later this year, Kim plans to increase the fund’s current duration of 2.7%.
As of Monday, the fund has exhibited strong performance, yielding a return of 9.3% over the past 12 months and almost 6% annually over the last five years, as per data compiled by Bloomberg.
