Overseas investors were net sellers of Asian stocks for third consecutive month in March, as a spike in U.S. bond yields and a stronger greenback prompted outflows from the region.
Foreigners sold a net combined total of $3.18 billion in South Korean, Taiwanese, Philippine, Thai, Vietnamese, Indonesian, and Indian equities last month, data from the local bourses showed.
Asian stocks looked lucrative at the start of 2021 as the region looked poised to leapfrog the West on its way to a fast Covid-19 recovery. However, outflows in the first quarter of the year suggest a reversal in sentiment. Anyhow, a quick return to growth would likely only mask deep economic and social scars.
Looking forward, Goldman Sachs warned that higher U.S. bond yields and concerns over tightening China policy could further affect regional stocks this quarter.
The Wall Street investment bank referred Asia’s internet and media stocks, and other high growth sectors such as biotech and healthcare as long-duration assets, more sensitive to the rise in yields.
Foreigners exited Taiwan and South Korea equities en mass. The two countries saw net sales of $3.2 billion and $1.3 billion, respectively, the biggest outflows in the region.
The tech-focussed economies house many high-flying tech stocks.
Philippines also faced outflows in March for the 17th consecutive month amid new lockdowns in Manila and nearby provinces. Investors fled Vietnam and Thailand too.
India and Indonesia bucked the trend, obtaining inflows of $1.6 billion and $800 million respectively.
The Nomura India Business Resumption Index (NIBRI) dropped to 90.7 for the week ended April 4, from 94.6 in the prior week — its steepest weekly decline since mid-April last year. “The fall was driven by a sharp deterioration in mobility data, while the impact on real activity indicators appears less severe.” Nomura said in a note.
With reporting by Reuters