They have higher price-to-earnings ratios than those in other big emerging markets. Unlike China’s cheap offerings, Indian stocks are expensive. Yet these various alternatives have flaws of their own. Asia-focused funds investing in real assets, including infrastructure, have grown in popularity. For those with broad mandates, different asset classes are an option. Last year foreign investors ploughed ¥3trn ($20bn) into Japanese equity funds, the most in a decade.
Western investors looking for exposure to China’s industrial stocks are also turning to Japan, encouraged by its corporate-governance reforms. Squint and the countries together look something like China: a fast-growing middle-income country with potential for huge consumption growth (India) and two that are home to advanced Asian industry (Taiwan and South Korea). These markets received around $16bn in the final three months of 2023. Money has poured into India, South Korea and Taiwan, whose shares together make up more than 60% of ex-China emerging-market stocks. An emerging-market, ex-China, exchange-traded fund (ETF) issued by BlackRock is now the fifth-largest emerging-market equity ETF, with $8.7bn in assets under management, up from $5.7bn in July.Ī handful of large emerging stock markets are benefiting. Jupiter Asset Management, Putnam Investments and Vontobel all launched actively managed “ex-China' funds in 2023.
