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Asian shares have seen the most important outbound outflows since March 2020

© Reuters. FILE PHOTO: An employee wears a protective mask to help prevent the spread of coronavirus disease (COVID-19) while at the Taiwan Stock Exchange in Taipei, Taiwan on February 8, 2021. REUTERS / Ann Wang

By Gaurav Dogra

(Reuters) – Asian stocks saw their largest outbound outflow in 14 months in May due to a surge in COVID-19 cases in the region and mounting inflationary pressures that dampened risk appetite.

Data from stock exchanges in South Korea, Taiwan, the Philippines, Thailand, Vietnam, Indonesia and India showed that foreigners sold a total of $ 12.05 billion in regional stocks, the highest since March 2020.

"The May outflows were for different reasons in different markets, but the common thread was the COVID-19 resurgence," said Manishi Raychaudhuri, Asia Pacific equity strategist at BNP Paribas (OTC :).

Graphic: Foreign investments in Asian stocks: https://fingfx.thomsonreuters.com/gfx/mkt/yzdpxmdrevx/Foreign%20investments%20in%20Asian%20equities.jpg

He said markets such as Taiwan, Thailand and India, which have faced a resurgence in COVID-19 cases, have been sold by FIIs in anticipation of a drop in consumption and cuts in earnings estimates.

South Korea led the outflows, posting net sales of $ 7.97 billion last month.

Taiwan faced $ 2.1 billion in runoffs, with the subtropical nation facing the worst drought in history after no typhoons hit the island directly last year, meaning much less rain .

For Thai and Indian stocks, net sales were $ 1.1 billion and $ 389 million, respectively.

India's daily infection rates have been falling in the past few weeks, raising hopes that a devastating second week will fade away.

However, concerns remain as only 3% of the country's population have been vaccinated to date, which is the lowest rate among the 10 countries with the highest number of COVID-19 cases.

BNP Paribas's Raychaudhuri said he expected foreign flows to selectively improve in some Asian markets, particularly Taiwan and South Korea, in the second half of 2021.

"Korea and Taiwan should benefit in the medium term as corporate earnings in both markets are strongly driven by global consumer spending, particularly in developed countries – a trend we believe will continue for a while," he said.

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