ASIAN equities witnessed massive foreign outflows in August, as risk sentiment was dented by worries over the longevity of the U.S. Federal Reserve's policy tightening cycle and a slowdown in the economic momentum of China.

       Data from stock exchanges in India, Indonesia, the Philippines, South Korea, Taiwan, Thailand and Vietnam showed that foreigners had offloaded a net $4.74 billion of equities in August, the biggest amount since September 2022.

       Last month, U.S. Treasury yields climbed to their highest in 16 years on expectations of an extended period of high-interest rates after crucial economic reports on jobs and consumption pointed to a surprisingly resilient economy.

       "Sudden jump in U.S. yields tend to be negative for Asian markets, especially for high duration markets, i.e. markets where a large part of their earnings is expected to come in future," said Prerna Garg, an equity strategist at HSBC.

       "The outflows were pretty substantial from Taiwan given it's a high-duration market," HSBC's Garg said.

       Overseas investors withdrew a net $3.65 billion from Taiwan equities, the most for a month since September 2022.

       "A sharp slowdown in Chinese economic momentum and continuing turmoil in the property sector were local factors that contributed to foreign investors' negative sentiment (for Asia)," said Manishi Raychaudhuri, Asia Pacific equities strategist at BNP Paribas.

       StarPicks

       Indulge in tradition and taste

       Indonesian, South Korean, Thai, the Philippine and Vietnamese equities recorded $1.32 billion, $569 million, $423 million, $131 million and $125 million, respectively, worth of net selling by non-native investors.

       Still, India attracted about $1.48 billion in foreign inflows as cross-border investors remained net buyers for a sixth consecutive month.

       "Among Asian and emerging market equity, India is perceived by foreign investors to be a relatively safe haven capable of providing uncorrelated returns," BNP Paribas' Raychaudhuri said.

       "India's stable economic growth, relatively robust earnings profile, uncorrelated nature of the domestic economy with the Developed Economies where risk of recession still looms, and the phenomenon of strong domestic flows neutralizing the fluctuations in FII flows are some of the drivers for such perception of safety."

       Meanwhile, last week's U.S. Commerce Department report showed the PCE price index, the Fed's primary inflation gauge, rose 3.3% year-on-year in July, aligning with forecasts, suggesting the economy is not overheating to produce more aggressive rate hikes.

       "There may be room for some foreign inflows," said Yeap Jun Rong, a Singapore-based market strategist at IG.

       "The Fed edges closer to the end of its tightening process, and some hopes are in place for China's supportive measures to stabilise growth conditions over the coming months." - Reuters