March 6, 2018 / 10:11 AM / 19 days ago

Foreigners trim Asian stock holdings in Feb, biggest outflow since 2015

(Reuters) - Foreigners turned net sellers of Asian equities in February, with outflows over the month hitting their highest in more than two years, amid an increase in market volatility as well as a rise in U.S. Treasury yields.

Investors look at computer screens showing stock information at a brokerage house in Shanghai, China February 9, 2018. REUTERS/Aly Song

February data from seven Asian exchanges showed foreign outflows totaled about $9 billion, the most since August 2015. That also compares to an inflow of $7 billion in January.


Some analysts say Asia is likely to see a further exodus of foreign funds given continued high valuations and worries over U.S. President Donald Trump’s tariff plans.

Taiwan stocks led the region with outflows of over $3 billion in February, while South Korea and Thailand witnessed outflows of $2.6 billion and $1.3 billion, respectively.

“February saw the revival of volatility with increased concerns over higher borrowing costs pressuring global equity markets,” said Jingyi Pan, a Singapore-based market strategist at trading and investments provider IG.


The CBOE Volatility index .VIX, the most widely followed barometer of expected near-term volatility of the S&P 500 index .SPX, jumped to a 2-1/2 year high in early February.

    “Asian markets had not been spared, with jitters cutting across to the region, inviting outflows from the considerably riskier Asian assets,” Pan added.

    MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell about 5 percent in February, its biggest decline in over two years.

    The exit of foreign funds from Asia was partly driven by attractive U.S. Treasury yields US10YT=RR that touched a 4-year high of 2.941 percent in February amid concerns U.S. inflation would pick up.

    Despite the recent correction, equities in India, China, Indonesia, Philippines were trading above their 10-year average price-to-earnings ratios at the end of last month, indicating more foreign selling could be on the cards, analysts said.

    Asian equities are also likely to come under further pressure from Trump’s tariff plans for imported steel and aluminum. South Korea is the No.3 steel supplier to the United States after Canada and Brazil and would be the hardest hit by the tariffs. Other Asian suppliers are Japan, Taiwan and India.

    “The U.S. tariff plan certainly kicked up the risk-off sentiment by a notch and the seemingly unfavorable developments could keep markets wary in the months ahead, capping inflows,” said IG’s Pan.

    Reporting By Patturaja Murugaboopathy; Editing by Himani Sarkar

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