By:
In January, massive investment flows were seen in Emerging Asia ex-China stocks due to expectations that the U.S. Federal Reserve will limit rate increases and a depreciating dollar relative to the region’s currencies.
Foreign investors bought regional shares worth a net $8.8 billion in January, according to data from stocks market in Taiwan, India, the Philippines, Vietnam, Thailand, Indonesia, and South Korea. Last year, they sold regional equities worth $57.2 billion.
Additionally, the reopening of China’s borders stoked expectations that the region’s exports and manufacturing activity would be stronger this year, boosting their profits.
With net inflows of around $6.6 billion and $5 billion, Taiwan and South Korea experienced their highest monthly purchases in at least two years.
According to Yeap Jun Rong, a market strategist at IG, “brewing views of an eventual stop to the Fed’s rate-hike cycle are providing some support for rate-sensitive growth sectors.”
“That may account for the strong inflows in Taiwan and South Korea, which are more growth-exposed.”
A total of $565 million, $178 million, and $122 million in foreign currency were also invested in Thailand, Vietnam, and the Philippines’ equities markets.
Inflows into Indian equities decreased by $3.52 billion due to higher valuations and the effects of the decline in Adani Group stocks.
After decreasing roughly 20% in 2022, the MSCI Asia-Pacific index increased by 7.2% this year. At the end of January, the index’s forward 12-month price-to-earnings ratio was 13.24, which is still below the 10-year average of 13.44.
According to Credit Suisse investment strategist Aman Patel, the revenue and margins of regional businesses are in danger due to sluggish economic growth and high input prices, which might start the next move lower in broad shares.
He does, however, anticipate varied performance because China’s post-zero-COVID-policy re-rating will probably continue as long as values are still very close to the long-term average.
“The release of domestic demand can drive growth higher despite still weak external demand,” he said.
Reading More:
