jackson losses meet: Largest line of Asian EM shares since 2020 faces Jackson Hole test

Global Fund Haven’t been so optimistic about emerging Asian stocks outside of China in almost two years. Whether this lasts will depend on US policy signals emerging on Friday.

Foreign investors poured a net $7.5 billion into nine regional markets in August, the largest monthly inflow since the end of 2020, according to exchange data compiled by Bloomberg. India took a large market share as foreigners pumped in $5.7 billion, while South Korea received $2.3 billion.

The buying wave reflects a similar track to Asian bond developments and this investor optimism will be tested as Jerome Powell outlining U.S. policy on Friday. Cash flow could dry up if the Federal Reserve Chair signals a determination to raise interest rates aggressively to curb inflation.

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Powell’s remarks will likely help define the path for emerging Asian stocks, which are weakening near two-year lows. Fears that rising interest rates could push the global economy into a recession have eroded demand for equities.

For now, the influx is fueling hopes of more buying, especially in the case of India, where funds are returning from a record $33 billion exodus from October to June. Hopes of an improving economy and corporate earnings are boosting confidence and the market’s relative attractiveness has also increased as China grapples with a property crisis and sporadic Covid shutdowns. .

“A trend reversal has emerged in the case of Indian stocks, as FII turned net long in July after nine months of non-stop selling,” Herald said.

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

According to HSBC’s analysis, funds tasked with investing in Asia are pivoting to underweight markets from overweight ones.

“Over the past month, these funds appear to have cut their exposure to the ASEAN, South Korean and Hong Kong stock markets to add to markets where they are underweight, such as Greater China,” wrote Linde. mainland, India and Taiwan.

–With support from John Cheng and Youkyung Lee.

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