By Gaurav Dogra
(Reuters) – Foreigners dumped Asian equities in July on mounting concerns over the Delta variant of the coronavirus, while China’s crackdown on its tech companies also hit sentiment.
Last month, cross-border investors sold equities worth a combined net total of $10.6 billion in South Korea, Taiwan, Philippines, Vietnam, Indonesia, and India, data from stock exchanges showed. That compares with an outflow of just $725 million in June.
“Asian stock market outflows may be attributed to worsening pandemic situations across the region as well as a hawkish-biased shift by the Fed during June’s FOMC meeting,” Margaret Yang, a strategist at DailyFX said.
The region’s stocks were hit heavily last month after Beijing banned for-profit tutoring on core school subjects, following crackdowns earlier this year on the tech sector.
Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas (OTC:), said the rapid changes in Chinese regulations affecting sectors such as e-commerce, food delivery and education have dampened sentiment in Hong Kong and China, and led to outflows from Asia as a whole.
Taiwan and South Korean equities led the selling in the region, facing outflows of over $4 billion each.
South Korea saw a rapid increase in the number of COVID-19 cases last month, hit by the more contagious Delta variant.
India, Thailand and Philippine equities also faced outflows worth $1.51 billion, $544 million and $183 million, respectively.
However, foreigners purchased Vietnamese equities worth a net $231 million, while Indonesian equities also had some meagre inflows.
Asian stocks have recouped some of their recent losses this week, helped by optimism over earnings and progress on an U.S. infrastructure bill.
“There may potentially be some fund inflows back into Asia equities as global sentiments take on a more risk-on approach with optimism over recent US infrastructure plan,” said Jun Rong Yeap, a Singapore-based market strategist at IG.
“Passing of infrastructure bills has traditionally led to positive market performance.”
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