jackson hole meet: Biggest EM Asia stock inflow since 2020 faces Jackson Hole test

Global funds have not been optimistic about emerging Asia East-China stocks in nearly two years. Whether it sustains or not will depend on US policy signals emerging on Friday.

Foreign investors netted $7.5 billion in nine regional markets so far in August, the largest monthly inflow since the end of 2020, according to exchange data compiled by Bloomberg. India had the lion’s share in the form of foreigners at $5.7 billion, while South Korea received $2.3 billion.

The buying wave reflects a similar dash in growth for Asian bonds, and this investor optimism will be tested when Jerome Powell paves the way for US policy on Friday. If the Federal Reserve chair signals a determination to press for curbing inflation with aggressive rate hikes, inflows could dry up.


Powell’s remarks are likely to help pave the way for emerging Asian stocks, which are nearing two-year lows. Concerns that rising interest rates could propel the global economy into recession have dampened demand for equities.

For now, the wave of inflows is fueling hopes of more buying, especially in the case of India where money is coming back after a record $33 billion exodus between October and June. A better outlook for the economy and corporate earnings is boosting confidence, and the relative appeal of the market has increased as China grapples with a wealth crisis and sporadic COVID lockdowns.

“A trend reversal has emerged in the case of Indian equities as FIIs became net buyers in July after nine months of continuous selling,” the Herald said.

Linde, head of APAC equity strategy at HSBC Holdings Plc, wrote in a note Thursday.

More broadly, according to an analysis by HSBC, funds that have authority to invest in Asia are moving from overweight markets to underweight markets.

“Over the past month, these funds have outperformed investments in ASEAN, Korea and Hong Kong stocks, where they are underweight in markets such as mainland China, India and Taiwan,” Linde wrote.

–With assistance from John Cheng and Yukung Lee.


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