May 22, 2012

Asia Money Flow - Outflow Continues

 Year-to-date inflow into global equities fell to USD1.5b after investors sold another USD4.4b for the week ending 16 May. Non-ETF investors reduced their holdings by USD2.8b, marking the eighth consecutive week of outflow. The increasing likelihood of Greece exiting the monetary union has roiled financial markets.

 In line with the global market weakness, Asia ex-Japan recorded outflows of USD240m and year-to-date inflows dropped to only USD269m. With the exception ofTaiwan and Vietnam, all other regional markets saw outflows, the most significant being in India, South Korea and the Philippines. Sentiment on India was also affected by the surprise jump in April inflation to 7.2% YoY. Apart from IT, all other sectors were hit by outflows as well, which we believe reflects the departure ofglobal funds from the region.

 We expect to see further outflows in the weeks ahead, as investors continue to de-risk ahead of the next Greek elections on 17 June 2012. Despite the selling, there is no sign of panic or capitulation yet; hence, it is too early for investors to bottom fish. It is no longer just an issue for Greece, but the potential for contagion that might claim the Spanish economy as well. The overnight credit rating downgrade on Spanish banks by Moody’s will add to their funding pressure and the outlook for the economy.

asia money flow
above: Weekly Countries Flow

by Maybank IB