Foreign investors turned net sellers of the Asian stocks after three consecutive months of buying as the Coronavirus infections are resurging across the continent. Also, the firmer US dollar dimmed the demand for riskier assets, prompting the investors to sell the stocks.
According to a Reuters report, in September 2020, foreign investors sold a combined net total of $6.5 billion worth of equities in various Asian stock markets across countries including India, Indonesia, Philippines, South Korea, Taiwan, Thailand and Vietnam. This marked their first net selling since May 2020.
According to Frank Benzimara, Head of Asia Equity Strategy at Socite Generale, flows into Asian stocks have not reverted since March 2020. Also, the correction in US tech stocks and growing concerns over the resurgence of the Coronavirus cases across Europe have affected the flows into Asian stocks in September 2020.
In September 2020, Taiwan saw $2.5 billion worth of outflows. On the other hand, South Korea experienced an outflow of $1 billion. South Korean and Taiwanese equities are mainly tech-reliant and they saw a bigger margin of regional outflows, triggered by heavy sell-off in tech stocks in the US.
Indian equities too faced outflows of $1 billion, as the country registered surging number of Coronavirus cases.
As of Wednesday, India has recorded 6.76 million Coronavirus cases, second only to the United States’ tally. Around 1.05 lakh people have died from the Covid-19 pandemic across the country. The daily infection rate reached to over 97,000 on 12th September in India.
On the other hand, in Indonesia too, equities saw an outflow of $1 billion. Around 0.3 million people have been infected by the virus.
Among other Asian stocks, equities in Thailand and the Philippines have faced outflows of $732 million and $306 million respectively.
On contrary, Vietnamese equities have bucked the trend and received inflows worth $135 million. This came as the Vietnamese economy picked up pace in the third quarter (July-September) of the current calendar year, backed by the effective containment of the Covid-19 pandemic in the South-East Asian country.
Analysts say that a breakthrough in terms of treatment of the Coronavirus or vaccine, dollar peaking or a sustainable V-shape recovery can act as catalysts to turn the tide. Also, the analysts believe that Asia’s better handling of the Covid-19 pandemic compared to several developed economies across the world could lure the investment inflows in the Asian stocks in the coming months.