Global financial firms pivot toward South Korea as China, India appetite cools: survey
By Jayshree P Upadhyay
MUMBAI, June 30 (Reuters) — Global financial firms are shifting their expansion strategies toward South Korea, scaling back earlier enthusiasm for China and India amid rising regulatory complexity and geopolitical uncertainty, according to an industry survey released Wednesday.
The study, conducted by the Asia Securities Industry & Financial Markets Association (ASIFMA) and KPMG, found that two-thirds of the 34 firms surveyed plan to grow their Asia-Pacific operations over the next three years. But the focus is narrowing: rather than betting broadly across the region, firms are concentrating on a handful of markets, deepening existing businesses and broadening product offerings.
Singapore, Hong Kong, South Korea, China, Japan, India and Taiwan draw roughly half of all expansion interest, yet the rankings are shifting notably. South Korea’s appeal has jumped sharply — with roughly 50% of respondents now eyeing expansion there, up from 21% a year earlier. The surge reflects a reassessment of a market long seen as undervalued, said ASIFMA Chief Executive Peter Stein.
“Sentiment is now extremely positive, not only in equities,” Stein said, pointing to growing expectations for South Korea’s bond market. “There is a clear expectation of increased activity in bond markets, supported by the government’s road map toward WGBI inclusion.” The potential addition of South Korean government bonds to the World Government Bond Index (WGBI) would open the door to significant foreign inflows and further deepen the country’s capital markets.
By contrast, China and India — Asia’s two largest economies — are drawing a more measured approach. In China, concerns center on capital controls, data security rules, and the broader geopolitical climate. Expansion interest has steadied at around 40%, down from earlier peaks. ASIFMA noted that firms remain uncertain about their long-term China exposure, with onshoring sentiment continuing to drift lower.
India, meanwhile, has climbed to fifth from eighth in ease-of-doing-business rankings, but regulatory conditions have toughened. Survey participants cited persistent friction in areas such as know-your-customer (KYC) standards and restrictions on non-deliverable forwards. “Participants recognize the commercial opportunity in Asia’s two largest markets but view their complex regulatory environments as a challenge,” ASIFMA said. As a result, appetite for expansion in India has cooled from earlier highs.
The broader backdrop is intensifying competition across Asia. “Five years ago, China was the dominant destination for foreign capital. Today, we are seeing more Asian countries compete for a share of Tier-1 global flows,” Stein said. Singapore’s sustained appeal underscores this multipolar shift: “It is not tied to China, the U.S., or any single ASEAN bloc,” ASIFMA noted, positioning the city-state as a neutral hub for global capital.
The findings signal a recalibration of global financial firms’ Asia strategies, with South Korea emerging as a new focal point even as the region’s giants present both promise and complexity. (Reporting by Jayshree P Upadhyay; editing by Mark Potter)