Foreign investors trickle back into Asian equities on hopes of Fed rate cycle peak

Nov 8 – Foreign investors are tiptoeing back into Asian equities in November, reversing a trend of heavy selling over the past three months, as easing concerns over aggressive interest rate hikes in developed markets renew risk appetite.

Expectations are mounting that US policy rates may have topped out, with potential cuts on the horizon as early as May. This shift in sentiment follows a perceived dial-back of the Federal Reserve’s hawkish posture and a softer monthly jobs data.

Data from stock exchanges in Taiwan, India, South Korea, Indonesia, the Philippines, Thailand and Vietnam showed foreigners bought stocks worth a net USD 2.05 billion in the past week after about USD 11.16 billion worth of net selling in October.

“We are seeing some unwinding of bearish sentiments into November, as markets bask in the hopes that the Fed is at its end of the hiking cycle,” said Yeap Jun Rong, a Singapore-based market strategist at IG.

“The improved risk environment may draw some inflows into Asian equities towards year-end, as we tread in the seasonally stronger period of the year.”

Responding to shifting rate expectations, US 10-year Treasury yields have fallen roughly 30 basis points this month, offering relief to rate-sensitive sectors such as technology, and renewing interest in South Korean and Taiwanese stocks.

10-year yields peaked at a 16-year high of 5.021% in October, fueled by solid growth forecasts and an expanding fiscal deficit.

South Korea’s markets have been a notable beneficiary, attracting USD 1.32 billion in foreign capital in November to date, a reversal from the USD 2.5 billion exodus last month.

Similarly, Taiwan’s equities have seen inflows of about USD 1.22 billion in the past week, despite foreigners shedding USD 17.4 billion since July.

Vietnam also reported modest foreign buying, with USD 28 million entering its market this month. However, India saw a withdrawal of USD 377 million by overseas investors over the past week, extending October’s USD 2.95 billion net sell-off.

Meanwhile, Indonesian, Thai, and Philippine stocks recorded foreign outflows of USD 429 million, USD 428 million, and USD 171 million, respectively, last month.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Varun H K)