Asian equities see large foreign capital outflows in 2021 despite December purchases

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US dollars and other global currencies lie in a charity receptacle at Pearson International Airport in Toronto, Ontario, Canada, June 13, 2018. REUTERS / Chris Helgren

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Jan. 5 (Reuters) – Foreigners were net buyers of Asian stocks in December, but inflows paled from the massive outflows seen throughout last year as regional stocks were hit by a strong dollar and a decline in business activity due to COVID-19 -driven curbs.

Cross-border investors bought Asian stocks with a net worth of $ 5.85 billion in South Korea, Taiwan, the Philippines, Vietnam, Indonesia and India last month, marking their biggest monthly inflow in 2021.

Still, the region faced total outflows worth $ 35 billion last year, the largest since 2008, according to data.

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Foreign investment flows: Asian equities

“FIIs have largely shunned Asian markets over the past two months largely due to the appreciation of the US dollar and well-performing developed market stocks, while Asian peers grappled with waves of COVID- 19 and regulatory measures, “said Suresh Tantia, senior investment strategist at Credit Suisse.

Investors were reluctant to take risks last year, especially in the region’s tech sector, amid rising costs, a disruption in its supply chain and as China launched a crackdown radical against its technology companies and the Internet.

South Korea and Taiwan, which rely heavily on its technology export revenues, recorded outflows of $ 22.85 billion and $ 16.25 billion last year.

Breakdown by country of foreign investment flows of Asian equities in 2021

In addition, concerns in the Chinese real estate sector, with its largest builder China Evergrande Group struggling to repay its debt, also weighed on confidence.

“In China, the real estate challenge will provide a headwind for growth for 2022, but we believe targeted easing should boost momentum, especially with modernization of manufacturing and green investment becoming the bright spot,” said Jessica Tea, senior investment specialist at BNP. Asset management of Paribas.

The MSCI Asia-Pacific Index (.MIAP00000PUS) fell 3.4% last year, compared to a gain of 16.8% for the MSCI World Index (.MIWD00000PUS).

Indonesian and Indian stocks received net inflows last year, however, the latter saw outflows worth $ 5.12 billion in the fourth quarter of 2021.

Jun Rong Yeap, market strategist at IG, said investors may not be willing to take more risk in India as the country appears more vulnerable to COVID-19 risks as only 43.6% of its population are fully vaccinated.

“While most Asian economies are well on their way to reopening, we believe it is still too early to expect continued inflows of FIIs in the near term,” said Tantia of Credit Suisse.

Asian equities are not particularly attractive given stable earnings revisions despite a -1.3 standard deviation haircut to global equities on a P / E basis. COVID-19 uncertainties remain with the rise of Omicron. “

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Annual flows of foreign investments: Asian stocks

Report by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; edited by Uttaresh.V

Our Standards: Thomson Reuters Trust Principles.


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