In November, foreign investors have rekindled their interest in Asian equities after three months of significant selling. This shift in sentiment can be attributed to diminishing worries about aggressive interest rate hikes in developed markets, reigniting risk appetite. This change comes in the wake of a growing belief that U.S. policy rates may have already peaked, with potential rate cuts expected as early as May. This expectation arises from signs of the Federal Reserve softening its hawkish stance and weaker monthly jobs data.
Asian stock exchanges reported a net foreign purchase of $2.05 billion in stocks last week, reversing the trend from October when net sales amounted to $11.16 billion. Market strategist Yeap Jun Rong from IG noted a decline in bearish sentiments, predicting year-end inflows into Asian equities due to an improved risk environment.
U.S. 10-year Treasury yields, which reached a 16-year high in October due to robust growth forecasts and an expanding fiscal deficit, have dropped approximately 30 basis points this month. This decline has renewed interest in South Korean and Taiwanese stocks, attracting $1.32 billion and $1.22 billion, respectively, despite previous outflows.
Vietnam also reported modest foreign buying, while India saw an outflow of $377 million from overseas investors. This shift toward Asian equities represents a significant departure from previous months’ trends and reflects a changing global investment landscape driven by evolving monetary policy expectations in the U.S.