Foreign flows into Asian equities turned positive in 2019 due to diminished fears about a Sino-U.S. trade war and a fall in U.S. interest rates, and analysts expect a recovery in regional economies to help keep the inflows coming in 2020.
Overseas investors purchased a net $23.47 billion worth of regional equities in 2019, the highest since 2016, data from stock exchanges in India, Indonesia, the Philippines, South Korea, Taiwan, Thailand, and Vietnam showed.
“Concerns had simmered through the year over geopolitics such as U.S.-China trade and Brexit issues, alongside economic growth concerns,” said Jingyi Pan, a Singapore-based market strategist with financial services firm IG.
“That said, for investors hunting for returns, riskier assets nevertheless remained in favour.”
Indian equities led the region with net foreign inflows of $14.7 billion last year, the highest since 2014. Taiwan and Indonesia also drew foreign funds totalling about $6 billion and $3.5 billion respectively.
DBS bank said that the Indian government’s removal of tax surcharges on foreign portfolio investors and the outperformance of domestic equities helped fuel inflows last year.
Thailand and Philippines, meantime, registered small outflows in 2019.
Foreign buying of regional stocks totalled $2.92 billion in December. During the month China and United States agreed on a preliminary trade deal that is expected to be signed on Jan. 15.
Goldman Sachs said foreign investors “net bought only half of the US$50bn peak-to-trough outflows of 2018 and cumulative FII flows are tracking more than US$40bn below the long-term trend, suggesting room to recover further.”
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4% so far this year, after securing 16.3% gains in 2019.
“Going into 2020 on a relatively good note for the outstanding issues from 2019 - including the U.S.-China trade (deal) -Asian equities are expected to continue seeing a steady foreign inflows,” said IG’s Pan.
“A modest recovery for most Asian economies is expected from 2019 that should keep the outlook positive for the region,” Pan said.