Asia Fund Manager Survey: Energy Risks and Inflation Concerns Dominate Market Sentiment

Overview

This report summarizes BofA's April 2026 Asia Fund Manager Survey. The survey was conducted from April 2 to April 9, 2026, with 193 respondents managing a combined $563 billion in assets; 170 respondents answered the global FMS questions and 90 answered the regional FMS questions. The core conclusion is that energy security risk in the geopolitical environment has become the top concern for Asia Pacific investors, inflation expectations have risen sharply, and Asia growth and corporate earnings expectations have weakened. However, AI, semiconductors, energy, technology hardware, and North Asia markets still retain relative appeal at the thematic and allocation level.

Core views

The report argues that Asian investor sentiment has clearly shifted toward defense and selective allocation. Energy security risk is a high or extreme concern for 91% of respondents, and a net 77% expect higher inflation. On the macro side, the outlook for Asia growth has turned from bullish to bearish, and BofA's economics team cut its 2026 Asia growth forecast to 4.3%. On earnings, expectations for the next 12 months in Asia Pacific ex-Japan have weakened materially. On themes, AI and semiconductors remain among China's most important themes, and a net 45% expect the semiconductor cycle to strengthen over the next 12 months. On positioning, investors prefer North Asia markets such as Japan, Taiwan, and Korea, underweight India, and rank energy, semiconductors, and technology hardware as the more favored sectors in Asia Pacific ex-Japan.

Analysis framework

The report is based on BofA's Fund Manager Survey sample, using net balance indicators to measure investors' directional views on macro growth, inflation, corporate earnings, sector allocation, and regional positioning, while combining insights from BofA's economics, strategy, and industry teams to interpret the survey results.

Methodology notes

• Investor surveyFund Manager Survey

  Net balance indicator

  Measures consensus direction and sentiment strength by comparing the share of respondents who are bullish versus bearish, overweight versus underweight, or expect improvement versus deterioration.

• Regional equity strategyAsia Pacific regional allocation comparison

  Regional and sector preference ranking

  Compares regions such as Japan, Taiwan, Korea, and India, as well as sectors such as energy, semiconductors, technology hardware, and banks, within one survey framework to identify marginal shifts in capital preference.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Asia Pacific ex-Japan equities

  Regional equity risk asset

  Strengths

  Still has positive expected returns; the survey indicates 3.1% expected upside over the next 12 months.

  Weaknesses

  Growth, inflation, and earnings expectations are all deteriorating, and earnings expectations are in a historically low range.

  Comparison

  Investor sentiment has shifted from optimistic to cautious compared with the previous survey.

  Risks

  Energy price shocks, persistent inflation, growth downgrades, and earnings revisions lower.

• Japan equities

  One of the preferred North Asia markets

  Strengths

  Still a favored North Asia market, with banks and semiconductors seen as attractive areas within Japan.

  Weaknesses

  A net 5% of respondents expect the Japanese economy to weaken, versus 50% expecting strength previously.

  Comparison

  Receives stronger allocation preference support than India.

  Risks

  Bank of Japan tightening timing, weakening economic momentum, and rate sensitivity.

• Taiwan and Korea equities

  Preferred North Asia markets

  Strengths

  Benefit from AI, semiconductor, and technology hardware themes and sit within the North Asia allocation bucket preferred by investors.

  Weaknesses

  Sensitive to the global technology cycle and semiconductor demand.

  Comparison

  More favored by investors than India.

  Risks

  Semiconductor cycle volatility, supply-chain bottlenecks, and changes in external demand.

• India equities

  Regional underweight

  Strengths

  A long-term structural growth narrative may still exist, but it is not the report's main positive conclusion.

  Weaknesses

  Has shifted from neutral to the most underweight region, with a net 36% underweight; BofA cut its forecast for Nifty earnings growth to 8.5% year over year, below consensus.

  Comparison

  Has clearly lost allocation appeal relative to North Asia markets such as Japan, Taiwan, and Korea.

  Risks

  Earnings downgrades, valuation pressure, and capital outflows from portfolio reallocation.

• Energy sector

  Most favored sector

  Strengths

  Has surged from neutral to the most preferred sector amid rising concerns about energy security.

  Weaknesses

  Preference may depend on geopolitical risk and sustained energy prices.

  Comparison

  Leads semiconductors and technology hardware to become the most favored sector in Asia Pacific ex-Japan.

  Risks

  An easing of ceasefire or supply risks could reduce the energy risk premium; policy intervention and weaker demand are also risks.

• AI and semiconductor theme

  Core theme in China and North Asia

  Strengths

  AI and semiconductors remain one of China's most dominant themes, and a net 45% expect the semiconductor cycle to strengthen over the next 12 months.

  Weaknesses

  55% of respondents believe the impact of AI on equities has already been priced in or is even overstated.

  Comparison

  Improved materially from net 14% expecting semiconductor cycle strength last month.

  Risks

  High valuations, supply bottlenecks, cyclical rollovers, and overly front-loaded market expectations for AI monetization.

• Japanese bank sector

  Favored sector in Japan

  Strengths

  Seen as one of the main beneficiaries of a higher-rate environment.

  Weaknesses

  Depends on higher rates and a steeper yield curve.

  Comparison

  Ranks alongside semiconductors as a preferred direction among Japan-focused investors.

  Risks

  Bank of Japan policy timing falling short of expectations, economic weakness, or rising credit risk.

Key data

• Survey sample193 respondents, managing $563 billion in assetsAmong them, 170 respondents answered the global FMS questions and 90 answered the regional FMS questions.
• Survey period2026-04-02 to 2026-04-09The report was published on 2026-04-14.
• Energy security concern91%Respondents are highly or extremely concerned about Asia Pacific energy security risks in the current geopolitical environment.
• Inflation expectationNet 77% expect higher inflationThis reading is at a four-year high.
• 2026 Asia growth forecast4.3%BofA's economics team cut its Asia growth forecast by 40 basis points.
• Asia Pacific ex-Japan earnings expectationNet 45% expect deteriorationCorporate earnings expectations for the next 12 months fell to the 12th percentile of historical readings.
• Asia Pacific ex-Japan expected equity return3.1%Fund managers' expected upside for Asia Pacific ex-Japan equities over the next 12 months has declined.
• Timing of the next BOJ rate hike32% in April and 32% in JuneRespondents' expectations for the Bank of Japan's next rate hike are evenly split between April and June.
• Semiconductor cycle expectationNet 45% expect strengthA clear improvement from net 14% in the previous month, showing that AI and semiconductor themes remain in focus.
• India allocationNet 36% underweightIndia has moved from neutral to the most underweight region.

Impact & implications

For investors, this report suggests that the macro risk premium in Asia Pacific equities may rise, as energy prices, inflation, and growth downgrades will weigh on broad risk appetite. However, capital is not leaving the market entirely; instead, it is being reallocated across regions and sectors toward relative winners such as North Asia, energy, semiconductors, AI, technology hardware, and Japanese banks. India's relative attractiveness has declined, mainly due to weaker earnings expectations and a less favorable valuation-growth mix.

Risks

• Continued disruption in energy markets, pushing up costs and inflation pressure.
• Inflation expectations at elevated levels may cap valuations and limit room for monetary easing.
• Asia growth forecasts are being revised lower and earnings expectations are weakening.
• AI-related equities may already have partially or excessively priced in optimistic expectations.
• India earnings downgrades and deeper underweight positioning may trigger regional capital reallocation pressure.
• Uncertainty over the timing of the Bank of Japan's next rate hike may affect rate-sensitive Japanese sectors and the currency.
• The report is a strategy survey and independent analysis; related securities or issuers are not necessarily covered on an ongoing basis.

What to watch

• Whether energy security risks ease and how energy prices feed into Asia inflation.
• Whether earnings expectations for Asia Pacific ex-Japan continue to be revised lower.
• Any further changes by BofA and the market to the 2026 Asia growth forecast.
• Whether the Bank of Japan's next rate hike comes in April or June, and the subsequent policy path.
• Whether the AI and semiconductor cycle delivers the improvement investors expect.
• Whether the allocation gap between North Asia markets and India continues to widen.
• Changes in crowding and valuations in favored sectors such as energy, semiconductors, technology hardware, and banks.