Foreign investors purchased Asian stocks for the fourth consecutive month in July, a change from the Federal Reserve’s previous tightening cycle, which resulted in significant outflows from riskier assets.
A year of global monetary tightening may be coming to an end, according to top central banks, which boosted interest rates one more last month despite falling inflation.
Foreign investors bought a net $3.48 billion worth of stocks in July, marking the fourth straight month of inflows since April, according to data from stock exchanges in India, Indonesia, the Philippines, South Korea, Taiwan, Thailand, and Vietnam.
Due to their lower valuations following a decline in the previous year and their promising growth prospects as a result of easing pricing pressures, Asian equities, excluding China, have recently emerged as a promising region for foreign investors.
Due to robust profits in recent quarters, foreign investors continued to be net purchasers in India for a fifth consecutive month in July, investing $5.68 billion into the country’s equity markets, which reached an all-time high.
FII ownership in India, at 17.9%, is still below the cycle average of 19%, thus FII flows still have some room to remain positive, according to Amit Sachdeva, India Equity Strategist at HSBC. The Indian market is already up 16% from its April lows.
The amount of inflows to South Korea, the Philippines, and Indonesia was $627 million, $333 million, and $181 million, respectively.
In the meantime, after two months of purchases, foreigners pulled $2.9 billion out of Taiwanese stocks due to worries about the country’s slowing economy.
Last month, there were a few small outflows from Vietnam and Thailand as well.
Concerns over a shaky post-COVID economic recovery, disappointment over the lack of a forceful policy response, and heightened Sino-U.S. tensions all contributed to a decline in foreign interest in China in the second quarter of this year.
Chinese stocks saw outflows of $4.25 billion in the second quarter of this year, while stocks in Asia excluding China saw inflows of $18.35 billion.
According to some observers, this divergence might persist.
Foreign investors’ favoritism for China, which peaked in the first quarter of this year, “started decline in the second quarter as macroeconomic data progressively disappointed and high levels of youth unemployment and a slowdown in the property sector cast a shadow on domestic consumption outlook,” according to Manishi Raychaudhuri, Asian equity strategist at BNP Paribas.
