Indian equities had the most foreign inflows of Asia emerging markets ex-China in June, as shares rallied to record highs on expectations of robust second-quarter earnings, an improved economic outlook and a resumption of monsoon rains.
Foreign investors purchased a net $5.7 billion in Indian equities last month, the biggest such inflow since August 2022, exchange data shows.
Elizabeth Soon, head of Asia ex-Japan equities at Pinebridge Investments, said first-quarter Indian earnings had been strong, helping encourage substantial foreign investor inflows, especially in financials.
"Core industries like cement, coal, electricity, and steel are also growing, with equity allocations from both domestic and foreign investors expected to fuel local markets," she said.
Yeap Jun Rong, market strategist at IG, said a subdued economic recovery for China despite the lifting of harsh pandemic restrictions has redirected capital into India.
Taiwan also saw net foreign inflows in June, some $1.7 billion, helped by a global rally in tech stocks.
Minyue Liu, an investment specialist at BNP Paribas, said a positive outlook for the global tech hardware cycle and the continued momentum for tech themes such as AI could continue to support flows into Taiwan.
The Philippines too saw foreign investment inflows with a net $97 million.
But South Korea had net outflows of $1.2 billion as shares fell on weaker economic activity in China. Indonesia and Thailand had net outflows of $294 million and $242 million respectively.
Overall, however, these seven Asian markets have witnessed robust inflows this year after sharp outflows last year, as the Federal Reserve has been less aggressive with monetary tightening measures to address inflationary pressures.
In the first half of this year, net inflows into their equity markets came to a $26.6 billion. That compares with a net outflow of $57.5 billion for the whole of last year.
"Ahead, Asia equities may continue to draw positive inflows with the prevailing global risk-on environment, but we are nevertheless climbing a wall of worry," IG's Jun Rong said.
"Market expectations are seemingly pricing for a soft-landing scenario in major economies such as the U.S.," he said.