Asian Equities: For four months, foreigners were interested in Asian equities in July. Spending increased because many thought the Fed might cease raising interest rates. This is a significant change from last year’s strategy, which drove investors away from riskier projects.
Despite decreasing pricing pressure, all major central banks raised interest rates last month. However, their increased caution signals that the year-long global expenditure cut may be ending.
In July, foreigners acquired $3.48 billion in equities in India, Indonesia, the Philippines, South Korea, Taiwan, Thailand, and Vietnam. Asian equities outside China have benefited from this uninterrupted surge since April. Last year’s price drop lowered theirs. Investors like them because they have growth potential, and pricing pressure is decreasing.
India attracted foreign investment. For the seventh month, buyers outnumbered sellers in July. They invested a record $5.68 billion in local stock markets. The corporation earned plenty of money in recent months. Since April, the Indian market has risen 16%.
According to HSBC India Equity Strategist Amit Sachdeva, Foreign Institutional Investors (FII) money remains favorable. FII holdings in India are 17.9%, below the cycle average of 19%. This suggests higher future FII flows.
Taiwan lost $2.9 billion as international investors sold its equities. Investors kept the equities for two months before this. People worried about Taiwan’s economy weakening caused this. Thailand and Vietnam withdrew minor amounts last month.
Foreign investors are less interested in China than in the first quarter. After COVID-19, people are worried about the economy, the government’s inadequate reaction, and increasing U.S.-China tensions. These factors contribute to diminishing enthusiasm. Chinese stocks lost $4.25 billion in the second quarter. Asia-excluding China stocks got $18.35 billion.
This international interest gap may persist. Foreign investors preferred China in the first three months of 2023. In the second quarter, bad economic indicators, high youth unemployment, and a declining housing market changed everything. This made investors doubt the country’s spending power.
To conclude, foreigners have purchased Asian equities, particularly in India, South Korea, the Philippines, and Indonesia. However, China is less appealing now, so some believe corporate tastes will stay diversified long. Investors are monitoring economic indicators and policy responses as global money tightening ends.