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Asia’s Stock Faces Biggest Foreign Outflow in 2022 Since Global Crisis of 2008

Some analysts predict more outflows this year as U.S. interest rates are expected to increase further

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Sadaf Hasan
Sadaf Hasan
Aspiring reporter covering trending topics

INDIA: In 2022, foreign investors withdrew more cash out of emerging Asian stocks than they had in any year since the beginning of the global financial crisis in 2008, as rising U.S. interest rates drove funds towards dollar-denominated assets.

Impact of global financial crisis on Asian stock market

Data from stock markets in India, Taiwan, the Philippines, Indonesia, Thailand, Vietnam, and South Korea revealed that foreign investors sold assets worth $57 billion last year, which is the biggest outflow of foreign investors since 2008.

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In December 2022, the U.S. Federal Reserve raised its overnight lending rate by an additional 50 basis points after four straight increases of 75 basis points earlier in the year.

Last year, the yield on safer 10-year U.S. Treasury bonds rose by about 230 basis points to 3.83% as a result of the hikes, which dwindled foreign demand for riskier regional equities.

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Taiwanese stocks witnessed withdrawals totaling $41.6 billion last year, leading regional sales, while India and South Korea saw outflows of $15.4 billion and $9.6 billion, respectively.

Due to weakening foreign demand and a bleaker economic outlook, the MSCI Asia Pacific index (.MIWD00000PUS) lost 19.4% last year, the most since it dropped 43.3% in 2008.

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Some analysts predict more outflows this year as U.S. interest rates are expected to increase further—at least in the first part of the year.

Market strategist at IG, Yeap Jun Rong, said, “The first half of the new trading year may offer a cautious tone in the region, as market investors brace for additional economic damage from tougher global central bank policies, as well as chances of China’s reopening causing cross-border virus spreads.”

In December, emerging Asian stocks saw net sales of $3 billion, excluding Japan and China. Taiwanese, South Korean, and Indonesian stocks experienced outflows of $2.55 billion, $1.31 billion, and $1.34 billion, respectively.

On the other hand, India, Thailand, and Vietnam experienced net inflows of $1.36 billion, $372 million, and $559 million, respectively, in December.

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