Asian equities saw meagre inflows in October after massive selling in the previous month, and analysts expect fears of a global recession and a stronger US dollar to weigh on near-term money flows into the region.
Data from stock exchanges in Taiwan, India, the Philippines, Vietnam, Thailand, Indonesia, and South Korea showed foreigners bought equities worth a net $53 million last month. In September, they had sold shares worth a net $8.8 billion.
Last month, the MSCI’s broadest index of Asia-Pacific shares fell 1.97 percent, compared with the MSCI World’s 6 percent gain.
“Headwinds to Asia intensified owing to enhanced US curbs on Chinese companies sourcing US technology and continued doubts about China’s economic recovery,” said ManishiRaychaudhuri, head of APAC equity research at BNP Paribas.
South Korea received the highest inflow of $2.1 billion, while Indonesia and Thailand got $729 million and $196 million, respectively. Taiwanese equities witnessed a huge outflow of $2.9 billion.
Destocking in the information and communication technology sector is massive, hitting many Taiwanese companies in the semiconductor sector, said Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis.
Vietnam, the Philippines, and India also faced outflows last month.
“Flows into Asia, especially North Asia, remain challenging in the face of DM (Developed market) recession concerns and a strengthening USD,” said BNP’s Raychaudhuri.
“Both drivers are likely to sustain in the near term.”
The region grapples with mounting inflationary pressures, interest rate hikes, and slowing economic growth, said Mark Haefele, chief investment officer, UBS Global Wealth Management, and added that aggressive US rate hikes have also hurt the region’s currencies and its export markets.
Goldman Sachs cut the region’s 2022 and 2023 EPS growth by 2 percentage points (pps) and 3 pps respectively at the end of last month, citing the negative impact of rising rates, a stronger dollar, and slower growth on earnings.
In September, outflows from tech-reliant South Korea and Taiwan jumped to a three-month high of $1.8 billion and $5.3 billion, respectively.
India and Thailand witnessed outflows worth $903 million and $653 million, respectively, after each seeing inflows in the previous two months. – Reuters
