Asian equities in May clocked their biggest foreign outflows in 14 months due to a spike in COVID-19 cases in the region and as growing inflationary pressure tempered risk appetite.
REUTERS: Asian equities in May clocked their biggest foreign outflows in 14 months due to a spike in COVID-19 cases in the region and as growing inflationary pressure tempered risk appetite.
Data from stock exchanges in South Korea, Taiwan, Philippines, Thailand, Vietnam, Indonesia and India showed foreigners net sold a combined total of US$12.05 billion in regional equities, the highest since March 2020.
“The outflows in May were driven by different reasons in different markets, but the common thread was COVID-19 resurgence,” Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas, said. Graphic: Foreign investments in Asian equities, https://fingfx.thomsonreuters.com/gfx/mkt/yzdpxmdrevx/Foreignper cent20investmentsper cent20inper cent20Asianper cent20equities.jpg
He said markets such as Taiwan, Thailand and India, which faced a resurgence in COVID-19 cases, were sold down by FIIs in anticipation of decline in consumption and cuts in earnings estimates.
South Korea led outflows, seeing net sales of US$7.97 billion last month on concerns over rising inflation, which has reinforced calls for gradual monetary tightening.
Taiwan faced outflows worth US$2.1 billion, with the sub-tropical nation dealing with its worst drought in history after no typoons directly hit the island last year, meaning much less rain.
Thai and Indian equities saw net sales of US$1.1 billion and US$389 million, respectively.
India’s daily infection rates have been falling in recent weeks, offering hope that a devastating second week is ebbing.
However, worries still linger, as just 3per cent of the country’s population have been vaccinated so far, which is the lowest rates among the 10 countries with the most COVID-19 cases.
BNP Paribas’ Raychaudhuri said he expects foreign flows to improve selectively in a few Asian markets in the second half of 2021, particularly in Taiwan and South Korea.