Morris said BNP Paribas is overweight emerging markets, where earnings expectations are improving not only for AI-linked assets but also for non-tech companies. This creates a healthier balance within the emerging-market opportunity set, with India positioned on the non-tech side.
“This is a healthier balance between AI and non-tech opportunities,” Morris said.
He expects this broader opportunity to support continued investor interest in emerging markets. While BNP Paribas does not have a specific India view, Morris said India could benefit from the wider allocation towards emerging markets.
The shift also reflects a more balanced global investment landscape. Compared with last year, when US exceptionalism dominated investor thinking, Morris sees more opportunities across the US, Japan and emerging markets.
The changing investment landscape is also important for Japan. Rising Japanese government bond yields could encourage domestic investors to buy Japanese Government Bonds (JGBs) instead of US Treasuries. This could lead to some unwinding of the yen carry trade and Japanese investments in US government bonds.
However, Morris does not expect this to destabilise the US Treasury market. He views the potential movement of Japanese capital back home more as a reallocation of assets.
“For me, it’s a rebalancing,” Morris said.The stronger yen could also create a trade-off for Japanese equities. Historically, a weaker yen has disproportionately benefited Japanese companies because of their exposure to exports. Foreign investors have also benefited from both rising Japanese equities and currency gains.
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If the yen appreciates, Japanese domestic investors could benefit, but foreign investors would lose some of the currency advantage.
Morris also sees a possibility that the Chinese yuan could become a more important funding currency for global investors. China has low interest rates and a low-growth, low-inflation environment, which could encourage investors to borrow in yuan and deploy the money elsewhere.
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