(Bloomberg) -- Global pension and sovereign wealth managers are flocking to India while growing hesitant on China, according to a new study. 

Almost 40% of investors chose India as the most attractive emerging market, while less than a quarter selected China in a survey by London-based think-tank Official Monetary and Financial Institutions Forum. It included 100 funds managing $26 trillion in assets, including Singapore’s GIC Pte. and Canada’s Caisse de Depot et Placement du Quebec.

The findings add to the signs of growing global optimism over India amid a cautious tone on China exposure. Beijing’s rising tensions with the West, policy mishaps after the pandemic and a weak economy have boosted India’s appeal as an alternate investment destination. 

India is well positioned to benefit from its strong growth, demographics and diversification of global supply chains, said the report’s authors led by Deputy Chief Executive Officer Clive Horwood. India is becoming more open to foreign investors, they said, citing the scheduled addition of the country’s assets to JPMorgan’s bond index in June.

“In contrast, there is hesitation on China” they said. “No surveyed fund has a positive outlook for its economy or expects higher relative returns from Chinese assets.” The majority of the respondents listed regulation and geopolitics as barriers to investing in China and would put their money there mainly because it’s part of benchmark gauges. 

Demand for Chinese assets has cratered in recent years, with foreign direct investment turning negative for the first time in the third quarter of the year as overseas investors pull out money on growing concerns over its economic recovery. 

China’s CSI 300 Index fell almost 1% in Friday’s morning session and was on track for its lowest close since February 2019. That’s in contrast to a rally in Indian equities, where S&P BSE Sensex Index rose 0.7% to inch toward a new high.

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