Foreign Investors Pull $49.77 Billion From Seven Asian Markets in October, Most in Four Months

Foreign investors sold a net $49.77 billion of equities in South Korea, Taiwan, India, Indonesia, Thailand, Vietnam and the Philippines in October, the largest monthly outflow since June, according to LSEG data. Worries about hyperscalers' cash burn on AI infrastructure and the prospect of tougher AI regulation after the US midterm elections hit technology-linked shares. Taiwan saw a record $30.68 billion exit, the most since at least January 2008, and South Korea lost $14.59 billion. A further $22.6 billion has left the seven markets this month. India drew $5.68 billion of inflows in November and won an overweight rating from HSBC, while Vietnam and the Philippines recorded modest October inflows.

Foreign investors withdrew a net $49.77 billion from seven Asian equity markets in October, the heaviest monthly outflow since June, as doubts about the profitability of artificial intelligence infrastructure spending and anxiety over tighter AI regulation drove a selloff in technology-linked shares.

The figure, compiled from LSEG data, covers South Korea, Taiwan, India, Indonesia, Thailand, Vietnam and the Philippines. The pace has not slowed this month: a further $22.6 billion has left the same markets so far in November.

Taiwan bore the brunt. Overseas investors sold a net $30.68 billion of Taiwanese stocks in October, the largest monthly exit since at least January 2008. South Korea followed with a net $14.59 billion of selling. This month, Taiwan has seen another $19.76 billion of outflows and South Korea $8.32 billion.

"The outflows reflect a retreat from AI-linked positions amid increased doubts about AI infrastructure spending and profitability," said Wael Makarem, lead financial market strategist at brokerage firm Exness. He added that before the US midterm elections, stricter environmental reviews and regulation were increasingly seen as obstacles to data center construction and chip demand.

Democrats won last week's midterm elections, including in states where local opposition to new data centers has been building, keeping regulatory risk at the front of investors' minds.

The rotation appears to have favored developed markets. The MSCI Asia Pacific ex-Japan index fell 6.91% in October, while the MSCI All Country World index slipped just 1.69%.

"International investors may have been drawn to the relative resilience of the S&P 500 compared to the MSCI Asia ex-Japan during the month," said Scarlett Liu, Asia-Pacific equity derivatives strategist at BNP Paribas. "Additionally, some investors may have increased allocations to US Treasuries as the 10y UST yield rose to 5.3% in early October."

India recorded a second straight month of foreign selling, with $3.6 billion leaving its equities in October. The tide has turned there this month, however, with a net $5.68 billion flowing in. HSBC upgraded Indian stocks to overweight on Monday, citing steadier earnings growth and improved valuations.

"We upgrade India to overweight as we think it now offers resilient earnings and more reasonable valuations," said Herald van der Linde, head of equity strategy for Asia Pacific at the bank, in a note.