Asia Draws Global Capital as Investors Diversify Beyond the U.S.

SINGAPORE, Oct. 7, 2025 — Global investors are shifting focus beyond the United States. Over the last nine months, they have directed roughly $100 billion into Asia excluding China. Kevin Sneader, president of Goldman Sachs for Asia-Pacific ex-Japan, described this as a diversification move rather than a withdrawal from the U.S. market.

Japan has emerged as a primary beneficiary, attracting significant capital inflows thanks to economic stability and favorable market conditions. Meanwhile, China’s equity rally, largely driven by domestic investors, has started to attract incremental foreign interest, especially in technology, consumer discretionary, and industrial sectors.

“There is incremental flow in this part of the world,” Sneader said at the Milken Institute Asia Summit 2025 in Singapore. “I think it's important to put it in the context of a diversification movement, not an exit movement.”

He cautioned, however, that some of this capital represents fast-moving hedge fund money, which may not indicate sustained investment, “The mutual funds, longer investors, that money's still not flowing back into China. But they're certainly taking a hard look at Asia,” he added.

China Regains Investor Focus but Caution Remains

Foreign investors are showing measured interest in China, particularly in sectors such as biotechnology, electric vehicles, and other technology-driven industries. Companies are exploring capital options, succession-driven sales, and innovative partnerships, signaling selective opportunities rather than broad-scale capital returns.

Ankur Meattle, Head of Funds and Co-investments, Asia, Private Equity at Singapore sovereign wealth fund GIC, highlighted that China’s stabilizing capital markets are creating a pipeline of exits expected over the next six months.

“With the capital markets in a better place, one is likely to see some exits also. So there is a pipeline of exits building up that we should see in the next six months,” Meattle said.

How is Globalization Shaping Investment?

Dilhan Pillay, CEO of Singapore state-owned investor Temasek, noted that the era of globalization as previously known has ended. Geopolitical tensions, tariffs, and energy constraints have reshaped the risk-return landscape, prompting investors and companies to prioritize resilience over efficiency in their strategies.

Resilience Over Efficiency: “Reconfiguration of supply chains to prioritize resilience comes at a cost,” Pillay said. Companies are increasingly willing to absorb higher costs to reduce operational disruption risk.

AI Shapes Strategy Across Sectors: Artificial intelligence now shapes political, social, and economic spheres. Pillay described AI as ‘the most transformative force across the political, social, and economic spectrum,’ highlighting its impact on investment strategies.

Sectoral Focus: Technology, Consumer, and Industrial Drive Interest

Sneader identified several sectors attracting strong attention from foreign investors:

Technology: Remains the most dynamic sector, with innovations in semiconductors, cloud computing, and AI applications drawing sustained interest.

Consumer Discretionary and Industrial: Companies in these areas are benefiting from structural growth and regional demand.

Healthcare: Private market investments are increasing, reflecting longer-term opportunities.

Japan continues to benefit from diversified capital inflows, while China sees incremental interest primarily from faster-moving funds rather than long-term institutional investors.

What Does This Mean for Investors?

Asia presents both opportunity and caution for global capital. While investors are actively diversifying from the U.S., the quality and speed of capital inflows vary, with hedge funds acting quickly while mutual funds remain measured.

Markets such as Japan are already reaping tangible benefits, while China is being evaluated cautiously, with interest growing selectively across innovation-driven sectors. Broader regional trends, such as supply chain reconfiguration and AI adoption, are shaping investment decisions across Asia.

“The mutual funds, longer investors, that money's still not flowing back into China. But they are certainly taking a hard look at Asia,” Sneader summarized, highlighting the careful optimism shaping investor behavior.

I think we should be cautious and not get too excited because part of that money is what I call global hedge fund money, the faster money.

Inputs from Saqib Malik

Editing by David Ryder