Foreign investors are pulling money out of emerging Asian stock markets at the fastest pace in nearly four years amid the escalating conflict in Iran, according to Bloomberg. Global funds have enacted $11 billion in net sales of equities in emerging Asian economies, excluding China. This marks the largest outflow since March 2022, based on data compiled by Bloomberg.
A record $7.9 billion has flowed out of Taiwan, approximately $1.6 billion from South Korea, and around $1.3 billion from India, the data shows.
The outflows triggered a record one-day decline for South Korea’s Kospi index and a series of trading halts on some markets.
The MSCI Asia Pacific Index has fallen by more than 6% this week, putting it on track for its largest weekly drop in almost six years and its worst performance relative to the S&P 500 since April. This shift reflects growing investor concern about geopolitical risks and their impact on regional economies.
The trend marks a reversal of one of the most profitable trades in recent months – “Sell America, Buy Asia.” This strategy involved shifting investments from expensive U.S. Stocks to Asian markets, driven by a weaker dollar, lower inflation, and demand for regional stocks linked to the artificial intelligence boom. The recent developments suggest a reassessment of this approach.
“Global funds were buying Asian equities with expectations of a weaker dollar and favorable inflation, but the conflict in Iran is questioning both assumptions,” said Gary Tan, a fund manager at Allspring Global Investments.
“Investors are now reassessing whether increased risk aversion could keep the dollar firmer for longer and whether higher oil prices could reignite inflationary pressures,” he added.
