Are global capital flows pooling around the Greater Indian Ocean?

Mabrouk Chetouane, Head of Global Market Strategy at Natixis Investment Managers, and David Rolley, Portfolio Manager and Co-Head of the Global Fixed Income Team at Loomis, Sayles & Company, compare the relative attractiveness of different emerging regions and highlight the growing role of ‘Greater Indian Ocean’ countries as hubs in capital allocation.

Mabrouk Chetouane (MC): Do you see emerging countries, whether in Asia or Latin America, as driving global growth in the coming years?

David Rolley (DR): Yes, I think so. The ‘Greater Indian Ocean’ is a very interesting place to observe what you might call a new and developing multi-country economy – that is, an area that encompasses Africa, the Greater Middle East, South Asia and South East Asia.

If you think about our last 70 or 80 years of history, I’d argue that in the 1950s and 1960s with the post-war recovery of Europe and the baby boom economy in the United States, it was a trans-Atlantic economy, whose centres of capital were London and New York. Since the late 1990s, the energy has moved to the Pacific Rim. There was the rise of Japan, followed by the Asian Tigers and China. From the end of the ‘90s until around 2017 you had roughly 20 years of Pacific era, which we could call a trans-Pacific economy. The US still played a very important role, but a lot of the energy was in China.

Now, China is not going to grow between 6 and 9%. Growth will more likely be between 3 and 5 % for many reasons. First the labour force is in decline, and the population is ageing. Transfer payments for older people is a burden that the working labour force has to pick up, and which means lower growth rates in their own living standards. The consumption share in GDP is quite low compared to most countries, while their investment share in GDP is comparably extremely high. China is trying to switch the growth driver from real estate investment to technology and exports such as automobiles, electrical vehicles, batteries or solar panels.

But the world may have a limited appetite for Chinese goods, which are subject to tariffs, even in emerging markets. We're already seeing signs of indigestion in some countries, such as Mexico, where they recently announced a new tariff on small packages coming from China. China is exporting both their manufacturing value-added and, at the same time, a kind of deflation to emerging markets. We see investment opportunities in some emerging bond markets where the inflation is slowing, partly because of China exporting disinflation through cheaper cars, cheaper solar cells, cheaper e-commerce platforms, cheaper phones, etc.

The Financial Times recently claimed Abu Dhabi wants to be the capital of capital.  Abu Dhabi is not competing with India for this title; it is competing with Dubai and Singapore. The Gulf wants to be the capital allocator of the greater Indian Ocean, which will be the fastest-growing part of the world. This area includes sub-Saharan Africa and India for a billion-person semi-continental economy. It includes Southeast Asia, Singapore being the other competitor for the capital of capital.

Why not India? India’s bankers aren't in India, they're in Dubai or Singapore. India does not have the capital flow freedom to play the capital allocation role that they probably should, given their size and their regional importance. But they still think of themselves from a regulatory perspective as more defensive than aggressive; they're worried about capital outflows, so they're worried about inflows. But if they were to completely deregulate the Indian rupee capital market, the latter may turn into an alternative to the dollar, the euro and the renminbi. Right now, it isn't.

I think India may change its mind, and over the next 5 or 10 years, the amount of financial innovation that occurs in the Indian economy may be surprising. You could see positive innovations in Indian capital markets, through deregulation and capital market deepening. The ocean of interest may move from the Pacific Ocean to the Indian Ocean.

MC: What about Latin America? Do you think there are opportunities in this part of the world?  And do you see any opportunities again maybe in Africa?

DR: I think Africa will grow, but when we look at some of the biggest economies such as South Africa, the growth track record has been quite disappointing for more than 20 years. It is still a very low-growth economy. Same thing for Mexico. I think the problems are not macro, they are micro: education, human capital, rule of law, safety. It's not a matter of terms of trade or budget balance. China transformed itself in 30 years. It's a superpower.
Mexico and South Africa did not. Capital allocators are more likely to have their offices in Abu Dhabi or Dubai than either Mumbai or Cape Town. 

Interview conducted in August 2025