Global investors shift from US equities drawn by Asia’s AI boom, looser Fed policy: BofA
News Summary
Global investors are diversifying away from US equities into Asia for the first time in a decade, driven by a weakening US dollar, likely easing US Federal Reserve monetary policy, and Asia's artificial intelligence (AI) boom, according to Candace Browning, Head of Global Research at Bank of America (BofA). While US equities attracted US$1.2 trillion from global investors between the first half of 2020 and the end of 2024, compared to US$200 billion for the rest of the world, investment inflows have slowed significantly in 2025. Investors are now allocating evenly between US equity funds and international markets. Browning highlighted Asia's substantial stimulus potential, intense competition in the tech sector, and more attractive valuations compared to expensive US stocks as key drivers, spurring inflows into Asian equities and, notably, Asian debt funds. The global AI market is projected to quadruple from US$300 billion in 2025 to nearly US$1.2 trillion by 2030, with approximately US$1 trillion potentially deployed in the Asia-Pacific region, particularly mainland China.
Background
From the first half of 2020 through the end of 2024, US equities significantly dominated global investment flows, attracting substantial capital, largely due to the robust performance of its technology stocks and the dollar's safe-haven status during periods of uncertainty. However, entering 2025, the market environment is shifting. The US Federal Reserve is anticipated to pursue looser monetary policy in 2025-2026, potentially in response to economic slowdowns or moderating inflation pressures. Concurrently, the US dollar is expected to weaken after a period of strength. Against this backdrop, the Asian region, particularly mainland China, is experiencing economic transformation and growth driven by AI technological innovation and application, drawing the attention of global investors.
In-Depth AI Insights
Is the anticipated Fed policy pivot truly sufficient to trigger a large-scale capital exodus from the US? - While Bank of America's view highlights expected Fed easing as a key catalyst for capital shifting to Asia, history suggests that even with a weaker dollar and looser Fed policy, the depth, liquidity, and innovative ecosystem of US markets retain a strong, long-term pull for international capital. - Investors need to critically assess the specific nature and scale of Asia's