Foreign investors turned net buyers of Asian stocks in June as optimism ahead of a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping, along with expectations of US interest rate cuts enraged sentiment.
Overseas investors purchased a net $4.2 billion worth of equities in June, data from stock exchanges in South Korea, Taiwan, India, Thailand, Philippines, Indonesia, and Vietnam showed.
The leaders of the United States and China decided late last month to restart trade talks after Trump offered concessions like issuing no new tariffs and an easing of restrictions on tech company Huawei in order to reduce tensions with Beijing.
A collapse in trade talks had created sharp foreign outflows from Asian equities in May.
In June, Thai equities attracted $1.5 billion worth of foreign money as the country’s political uncertainty ended after General Prayuth Chan-ocha secured a needed majority in the parliament.
Sino-US trade optimism allowed Taiwan and South Korea to secure higher inflows last month, as the two countries have extensive ties with tech companies in China and are part of their supply chains.
However, India received just $374 million worth of inflows, the lowest in five months, as concerns over sluggish consumption and slowing growth overruled last month’s national election euphoria.
So far in July, foreign investors have sold a net $451 million in Indian equities. In its annual budget on Friday, the government proposed to increase listed companies’ minimum public shareholding and raise the income tax surcharge on foreign portfolio investors.
June inflows into Asia was also helped by expectations that the US Federal Reserve would actively cut interest rates soon to boost the economy.
However, a recent rebound in US job growth has shunned the likelihood the Fed will cut rates at its next meeting later this month, pressuring equity markets globally.
A rate cut at the next FOMC meeting at the end of July is also far from a done deal given the still strong state of the US labour market.
