Asian stocks draw robust foreign inflows on US rate outlook, tech rally

Foreign investors channeled massive money into Asian equities in June, after two months of selling, as easing US price pressures raised hopes that the Federal Reserve would cut interest rates this year.

Market optimism was further fueled by a surge in global AI-linked firms, enhancing demand for tech and semiconductor exports from Asia.

Foreign investors bought a net USD 7.16 billion worth of regional equities, according to stock exchange data from South Korea, India, Taiwan, Indonesia, Vietnam, Thailand, and the Philippines.

US inflation held steady in May, aligning with economists’ forecast, a Commerce Department report indicated last week. Fed Chair Jerome Powell said on Tuesday that the US is back on a “disinflationary path”, reinforcing expectations about forthcoming rate cuts.

Technology exporters – South Korea and Taiwan – saw foreign purchases in equity markets last month worth USD 3.83 billion and USD 1.94 billion, respectively.

“Both (South Korea and Taiwan) have served as major beneficiaries from the ramp-up in AI investments,” said Yeap Jun Rong, a market strategist at IG.

Propelled by the global tech rally, the MSCI Asia Pacific IT index advanced nearly 10% in June, marking its best performance in seven months.

Indian markets attracted USD 3.19 billion in foreign funds, a sharp contrast to the USD 3.06 billion net sell-off the previous month.

“After (a very short) panic sell post the election, Indian equities have quickly picked up the upward trend as investors sees a policy continuity with the new government,” said Minyue Liu, an investment specialist at BNP Paribas Asset Management.

“We believe the Indian economy is at the cusp of a multi-year economic growth cycle backed by the “Production Linked Incentives (PLI)” schemes, favorable demographic structure, and strong FDI.”

Still, stock markets in Thailand, Vietnam, the Philippines, and Indonesia faced net outflows worth USD 936 million, USD 658 million, USD 104 million, and USD 91 million, respectively.

“We remain constructive on the outlook for Asian equities,” BNP Paribas’ Liu said.

“Most regional central banks’ rate-hiking cycles appear to have reached a turning point, which would be positive for Asian equities.”

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Sherry Jacob-Phillips)