Foreigners pull out of Asian equities for fifth straight month in May

By Gaurav Dogra

Overseas investments
Asian investments
Reuters
2 min read Last Updated : Jun 02 2022 | 4:37 PM IST

By Gaurav Dogra

(Reuters) - Asian equities continued to witness foreign outflows for a fifth consecutive month in May, hit by concerns over monetary tightening measures by major central banks and supply chain disruptions due to strict lockdowns in China.

Overseas investors withdrew $3.69 billion out of Asian equities, data from stock exchanges in Taiwan, India, South Korea, the Philippines, Vietnam, Indonesia and Thailand showed. However, the outflows were the smallest in the last five months.

Graphic: Monthly foreign investment flows in Asian equities - https://fingfx.thomsonreuters.com/gfx/mkt/lbvgndyagpq/Monthly%20foreign%20investment%20flows%20in%20Asian%20equities.jpg

Also Read

"With surging real rates and consequent recession fears, equities have been sold worldwide, and risky assets like EM Asia equities more so given the fears sorrounding Fed tightening and upcoming quantitative tightening continue to depress Asian currencies," said Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas.

Foreigners offloaded Indian equities worth $5.18 billion, the biggest amount since March 2020, amid concerns over a weakening rupee and rising oil prices.

Indian rupee hit a record low against the dollar and the country's inflation levels also jumped to multi-year highs.

Indonesian and Philippine equities also witnessed some outflows.

However, Taiwan, Thailand and South Korea received inflows worth $819 million, $611 million and $168 million, respectively.

Graphic: YTD performance of Asian currencies against the USD - https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwegylpo/YTD%20performance%20of%20Asian%20currencies%20against%20the%20USD.jpg

"Countries like Thailand, Indonesia and to some extent Vietnam are benefiting from a supply-chain rerouting as markets try to diversify away from dependence on China, both in the wake of trade tensions and Covid-related issues," DailyFX strategist Ilya Spivak said.

Some analysts said regional equities are relatively more resilient this time, despite aggressive selling by foreigners, as their central banks possess strong foreign reserves and economies have better economic fundamentals.

Alex Loo, strategist at TD Securities, expects limited downside for further equity outflows this year.

"Asia equities gained after quantitative tightening in 2017, tracking the rise in US equities (S&P 500) which likely supported equity inflows in 2017."

"FX reserves are also more sizeable now and should buffer any aggressive sell-off in FX if U.S.' financial conditions overly tighten," he added.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Rashmi Aich)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :Forex EquitiesInvestor

First Published: Jun 02 2022 | 4:37 PM IST

Next Story