Speaking on the impact of the US shutdown, Brandt stated that money managers are not paying meaningful attention to it at the moment. He explained that based on the past three shutdowns, the market has learned to look past the political impasse. While the first shutdown did affect fund flows and yields, the subsequent two saw inflows into US bond funds and no significant change in the 10-year Treasury yield.
Brandt suggested that the situation could become a concern if it persists into late October or November, but for now, it is not a primary driver of investment decisions.
He highlighted a shift in fund flows within emerging Asia. He clarified that the trend is not necessarily one of investors turning negative on India, but rather one of them getting ‘so much more excited’ about other major markets. This has led to a definite rotation of some capital away from India, which had previously been a strong recipient of foreign funds.
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Two markets, in particular, are benefiting from this reallocation: China and South Korea. Regarding China, Brandt observed what he described as a ‘capitulation’ among investors. After months of resisting the performance of Chinese equity markets, money is now starting to chase that outperformance. In the case of South Korea, Brandt stated that a lot of money has recently been heading towards the market due to its ‘enticing combination’ of factors.
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He stated that Korea offers investors exposure to the burgeoning artificial intelligence (AI) story, coupled with an attractive domestic reform narrative. This dual appeal is making it a preferred destination for fresh capital allocations in the region.
For the entire interview, watch the accompanying video
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