REUTERS: For the second month in a row, foreigners were net sellers of Asian shares, as rising inflationary pressure and a jump in coronavirus infections in the area dampened risk appetite. According to stock market data, cross-border investors sold a total of US$725 million worth of equities in South Korea, Taiwan, the Philippines, Vietnam, Indonesia, and India last month.
This brought the overall outflows in the first half of the year to US$24.6 billion, compared to total inflows of US$21.6 billion in the second half of previous year.
Asian shares have trailed behind the gain in US and European equities this year, hampered by a surge in COVID-19 infections and concerns that the US Federal Reserve would raise interest rates sooner than predicted.
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According to Herald van der Linde, head of Asia equity strategy at HSBC, the shift in flows this year does not indicate a dent in the region’s profits recovery aspirations.
“Asian equities have been weighed down by increasing bond yields. This resulted in a shift away from Asian shares and towards developed market equities “he stated Last month, Taiwan and South Korea were the countries with the largest outflows, with net sales of US$2 billion and US$795 million, respectively. Outflows were also seen in Thailand, Vietnam, and the Philippines. The extremely contagious Delta variety has fueled an increase in coronavirus cases in South Korea, while Thailand is also seeing a long-term virus outbreak.
Indian equities, on the other hand, received US$2.4 billion in foreign money in June, following two months of outflows.
According to Goldman Sachs, Asian equities are selling at a nearly 30% discount to US equities, and a consolidation in US equities might cause flows to shift to non-US equities, such as Asia.
“Asian markets are fundamentally healthy, and any outflows are more about rebalancing than anything else,” said Paul Sandhu, BNP Paribas Asset Management’s head of multi-asset quant solutions.
(In Bengaluru, Gaurav Dogra and Patturaja Murugaboopathy contributed reporting; Sherry Jacob-Phillips edited the piece.)/n
