In April, foreign investors became net purchasers of Asian equities, boosted by rising expectations that the U.S. Federal Reserve will halt its aggressive tightening cycle, as well as other factors such as a weaker dollar and robust first-quarter company earnings.
Data from stock exchanges in India, Indonesia, the Philippines, South Korea, Taiwan, Thailand, and Vietnam revealed that foreigners bought a net $872 million worth of equities in April, the highest monthly purchase since January.
Recent bets on additional Fed tightening have decreased as the failure of three U.S. regional banks has fueled fears of a recession and higher interest rates have increased the cost of borrowing for businesses and consumers.
Wednesday, as anticipated, the Federal Reserve raised interest rates by a quarter of a percentage point and signaled it may delay further rate hikes to assess the impact of recent bank failures and inflation trends.
Chetan Seth, an equity strategist at Nomura, stated that any weakness in Asian stocks due to fears of a U.S. recession will be an opportunity for investors to increase their exposure to the region due to factors such as China’s recovery, the anticipated bottoming of the tech sector downturn, and a robust 2024 earnings recovery.
The March quarter net income of Asian companies exceeded expectations by 3%.
The net foreign inflow of $1.42 billion into Indian equities was the largest since November 2022, due to a rally in local shares.
Last month, Indian stocks performed the best in the region, with the Nifty 50 gaining 4.1%, its largest monthly gain since November 2022.
Foreigners also invested $830 million, $616 million, and $34 million in Indonesian, South Korean, and Philippine equities, respectively.
Meanwhile, Taiwanese equities saw a net outflow of $1.73 billion, and Thai stocks saw a net outflow of $231 million.
Yeap Jun Rong, a strategist at IG, stated that the U.S. dollar’s continued proximity to a one-year low was also positive for EM Asia equities.
In April, the U.S. dollar fell 0.94 percent against a basket of key world currencies for the second consecutive month, as expectations of additional Fed rate increases diminished.