A sell-off in Asian stocks surged in the final quarter of 2024 amid widespread concerns that U.S. President-elect Trump's trade policies will harm Asian economies.
Foreign investors bought $26.6 billion worth of Asian stocks in 2023, but last year they sold nearly $16 billion worth of shares in Taiwan, South Korea, India, Thailand, Indonesia, Vietnam and the Philippines.
Encouraged by the Federal Reserve's easing policies and regional economic growth expectations, they invested US$14.67 billion in the first three quarters. But then, hit by a stronger dollar and rising U.S. Treasury yields, they turned to accelerated selling.
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Last year, Taiwan led the region with outflows of $12.4 billion, followed by Thailand and Vietnam, with net sales of $4.11 billion and $3.63 billion respectively.
Goldman Sachs analyst Timothy Mo said the macro backdrop for Asian stock markets this year remains challenging.
Market headwinds at the start of the year included mixed economic data, rising U.S. 10-year Treasury yields and a stronger U.S. dollar, as well as U.S. may impose new tariffs on Asia-Pacific economiesMoi added that economic policy uncertainty and geopolitical risks continue to be elevated.
Last year, higher returns in other markets also drew overseas investors away from the Asian market. The return rate of the MSCI Asia Pacific Index in 2024 was only 7.23%, far lower than MSCI World's 15.73% and MSCI America's 23.4%.
Trump, who took office on January 20, promised to impose a 10% tariff on all global imports from the United States and a 60% tariff on Chinese goods. These measures are expected to affect other Asian exporters due to integrated supply chains with China.
IG market strategist Yeap Jun Rong said that although Trump's threats may eventually be reduced through negotiations, “it seems premature to expect lower tariffs at this stage.” It may still be limited at the moment.
Jason Lui, head of Asia Pacific equity and derivatives strategy, said: “We believe foreign investors will be selective in markets and sectors, as we expect Asian equities to trade based on their respective domestic policy agendas and sensitivities to U.S. monetary and trade policies. Greater differences arose over sex.
- Reuters Additional editing by Jim Pollard
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