March 7 (Reuters) – Most emerging Asian ex-China equity markets saw foreign capital outflows in February as strong US economic data fueled fears that the Federal Reserve would keep interest rates high for longer than expected.
Foreigners sold a net $2.1 billion worth of shares in the Thai, Indian, Philippine and Vietnamese markets, data from exchanges showed.
“We believe the main reason for weak FII flows in February was the profound shift in market expectations regarding the Fed’s rate hike trajectory,” said Manishi Raychaudhuri, head of equity research for Asia-Pacific at BNP Paribas.
“At the end of January, the market’s expectation for the top rate of fed funds was 4.9%. By the end of February, it had risen to 5.5%.”
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US consumer inflation rose higher-than-expected in January while job growth accelerated, prompting a turnaround in sentiment on Fed policy.
The trend of money flow from South Asia to North Asian equities continued in February on China’s plans to reopen borders.
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Thai stocks suffered $1.28 billion worth of foreign outflows, the largest monthly net selling by outsiders since April 2020.
Meanwhile, Indian and Philippine stocks also saw foreign outflows worth $647 million and $155 million, respectively.
However, foreigners bought South Korean and Taiwanese stocks for the second straight month, with inflows of $918 million and $877 million, respectively.
“In India, the Adani Group saga sparked some fears of widespread financial contagion in February, leading to some de-risking of Indian equities among overseas investors,” said Yeap Jun Rong, strategist at IG.
On the other hand, Indonesian stocks received $378 million in February after registering $1.55 billion in outflows in the previous two months.
“Looking ahead, a key factor will be whether Indonesia will continue to show economic growth, such as continued credit growth from major banks and positive consumption data,” said Jerry Goh, investment manager for Asian equities at fund house abrdn.
Reporting from Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Edited by Sherry Jacob Phillips
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