Foreign outflows from emerging Asia in 2022 highest since 2008

Stock Exchange of Thailand one of the exceptions, with net foreign buying for first time since 2016

Share prices are displayed on a board outside the Bombay Stock Exchange (BSE) in Mumbai. (Reuters File Photo)

Foreign investors withdrew more money from equities in emerging Asian economies in 2022 than they had in any year since the global financial crisis in 2008, as rising US interest rates pulled funds towards dollar assets.

Data from stock exchanges in Taiwan, India, the Philippines, Vietnam, Thailand, Indonesia and South Korea showed foreigners sold equities worth $57 billion last year, the biggest outflow since 2008.

Thailand was one of the rare exceptions to the trend, with foreign net buying of 202.7 billion baht (about $6.1 billion) worth of shares on the Stock Exchange of Thailand. It was the first time since 2016 that foreigners had not been net sellers on the local bourse.

After four straight increases of 75 basis points earlier in 2022, the US Federal Reserve raised its overnight borrowing rate by another 50 basis points in December.

Due to the increases, the yield on safer 10-year US Treasuries climbed about 230 basis points to 3.83% last year, which sapped foreign demand for riskier regional equities.

Taiwanese equities faced outflows worth $41.6 billion last year, leading the regional sales, while India witnessed an outflow of $15.4 billion and and South Korea $9.6 billion.

Hit by falling foreign demand and a worsening economic outlook, the MSCI Asia Pacific index plunged 19.4% last year — the biggest fall since dropping 43.3% in 2008. In Thailand, the SET Index recorded a modest gain of 0.7% from the end of 2021.

Some analysts expect more outflows, at least in the first half of 2023, as US interest rates are expected to rise further before peaking later in the year.

“The first half of the new trading year could continue to bring a cautious tone in the region, as market participants brace for further economic impact from tighter global central banks’ policies, along with risks of China’s reopening triggering cross-border virus spreads,” said Yeap Jun Rong, a market strategist at IG.

In December, emerging Asian equities, excluding Japan and China, witnessed net sales worth $3 billion, with outflows of $2.55 billion from Taiwan, $1.34 billion from Indonesia and $1.31 billion from South Korea.

On the flip side, India received a net inflow of $1.36 billion, Vietnam $559 million and Thailand $372 million.