Foreign money is leaving Asian equities ex-China this month, LSEG data shows

Foreign money is leaving Asian equities, excluding China, this month as concerns about hefty stock valuations and conflict in the Middle East spur investors to book profits.

Some investors also appear to be moving money into Chinese and Hong Kong shares after Beijing’s announcement of stimulus measures drove a rally in local shares, analysts said.

According to LSEG data, foreigners have so far divested a net USD 7.61 billion worth of shares in India, Indonesia, Thailand, Vietnam, South Korea, Taiwan, and the Philippines this month, following net purchases of USD 759 million a month ago driven by optimism over a large rate cut by the US Federal Reserve.

“We have seen further profit-taking pressure on Korea and Taiwan due to the shift in momentum on global AI/semiconductor investment theme,” said Jason Lui, head of APAC equity and derivative strategy at BNP Paribas.

“Some of the capital from East Asia (Japan, Korea, Taiwan) may have been reallocated back to HK/China as well.”

Taiwanese and South Korean stocks saw foreign net outflows of about USD 1.71 billion and USD 426 million, respectively, following USD 2.94 billion and USD 5.73 billion worth of net selling in September.

Overseas investors have, meanwhile, snapped up a net USD 5.81 billion worth of China-focused funds since the beginning of this month, LSEG Lipper data showed.

Indian equities have recorded about USD 5.35 billion worth of foreign net outflows in October, driven by disappointing corporate updates and caution over high valuations, contrasting with USD 6.89 billion in net inflows last month.

Indian equities trade at a price to 12-month forward earnings ratio (P/E) of 23.24 compared with a P/E of 12.63 for Asia. The P/E for Chinese shares is just 10.34.

According to Yeap Jun Rong, market strategist at IG: “The India story remains compelling for foreign investors despite softer growth momentum, as economic fundamentals are still strong.”

Thai and Indonesian stocks also saw USD 375 million and USD 176 million worth of net outflows, respectively, following USD 860 million and USD 1.42 billion worth of net inflows in September.

“We may expect a more cautious stream of inflows for the region as we head into the US election, which adds a layer of uncertainty for global markets,” IG’s Rong said.

(Reporting by Gaurav Dogra in Bengaluru; Editing by Mark Potter)