In the first week of November, Asian equities experienced significant cross-border outflows as investors reacted to high technology valuations and growing concerns regarding the sustainability of the recent market rally. Investors pulled approximately $10.18 billion from stock markets across Taiwan, South Korea, India, Thailand, Indonesia, Vietnam, and the Philippines during the week ending November 7. This marks a dramatic turnaround from the previous month, when there had been $2.28 billion in net purchases.
Particularly, South Korean stocks faced net foreign outflows of around $5.05 billion, a stark contrast to the $4.21 billion recorded in inflows during October. Similarly, Taiwanese equities saw $3.86 billion in net cross-border sales, surpassing the $3.21 billion outflows of the previous month. Market analysts have pointed out that these foreign divestments in South Korea and Taiwan are largely influenced by challenges faced by leading AI-related companies, reflecting broader global economic headwinds impacting markets in both Japan and the U.S.
The MSCI Asia ex-Japan information technology sector index reported a decline of 4.23% last week, following substantial gains of 62.5% over the six months leading up to October. Similarly, the MSCI’s global information technology sector index fell by 4.38% the prior week. Mark Haefele, chief investment officer at UBS Global Wealth Management, acknowledged that while renewed concerns over high technology valuations have led to increased market volatility, robust underlying fundamentals suggest that current valuations are still justified. He forecasted a 15% growth in earnings for the global tech sector this year, with a further solid increase of 12.5% expected in 2026.
As of October’s end, the MSCI Asia Pacific ex-Japan index exhibited a 12-month forward price-to-earnings (PE) ratio of 15.81, the highest recorded since June 2021. Indian equities, on the other hand, faced a net outflow of $1.42 billion last week, following an inflow of $1.66 billion in October. An HSBC report emphasized that India is currently the largest underweight in emerging market (EM) portfolios, with only 25% of tracked funds allocated to India being overweight compared to their benchmarks.
The report described India as a promising hedge against AI volatility, highlighting its potential to attract increased investment into the region. Meanwhile, both Vietnam and Thailand saw minor foreign outflows of $95 million and $40 million, respectively. Conversely, Indonesia and the Philippines reported inflows of $207 million and $77 million, respectively, during the same timeframe.
