Asian equities lose $50bn as foreign investors retreat

Foreign investors pulled nearly US$50 billion out of Asian equities in October, the largest monthly outflow in four months, as worries about artificial intelligence spending and tougher AI rules hit tech-linked stocks. The Bangkok Post, citing Reuters and data from LSEG, reported that the net withdrawal from seven Asian markets reached $49.77 billion, the biggest since June.

The selloff is a warning sign for regional markets that have leaned heavily on the AI boom, and it is not over. Foreigners have sold another $22.6 billion so far in November.

Where the money left

The October figure covers equities in South Korea, Taiwan, India, Indonesia, Thailand, Vietnam and the Philippines. Most of the pain was concentrated in two chip-heavy markets:

• Taiwan: a net $30.68 billion sold in October, the most since at least January 2008;
• South Korea: a net $14.59 billion sold;
• India: about $3.6 billion of outflows, a second monthly withdrawal in a row;
• Indonesia: $938 million of outflows.

Taiwan and South Korea have lost a further $19.76 billion and $8.32 billion so far this month, the report said.

Why Asian equities are under pressure

Analysts quoted by Reuters pointed to two drivers. The first is doubt about the cash burn at the large US cloud companies that buy AI hardware, which raises questions about how long the spending can continue. The second is the risk of stricter AI and environmental rules ahead of the US midterm elections.

Wael Makarem, a market strategist at Exness, said the outflows reflect a retreat from AI-linked positions amid increased doubts about infrastructure spending and profitability. He added that tighter environmental reviews were seen as a brake on data centre construction and chip demand. Democratic wins in last week's midterms, including in states where opposition to new data centres has grown, kept those concerns alive.

The MSCI Asia Pacific ex-Japan index fell 6.91 percent in October, compared with a 1.69 percent decline in the MSCI All Country World Index. Some analysts said money may be moving to developed markets. Scarlett Liu of BNP Paribas noted the relative resilience of the S&P 500 and said some investors may have shifted into US Treasuries after the 10-year yield rose to 5.3 percent in early October.

What it means for Thailand

Thai stocks were a small part of the story. Foreign investors sold a net $199 million of Thai equities in October, far less than in Taiwan or Korea. Vietnam and the Philippines even recorded inflows, of $122 million and $109 million respectively.

That said, a broad pullback from the region can still affect Thai sentiment, the baht and the cost of capital for local companies. Investors in Thailand will be watching whether the November outflows slow or deepen.

There were some bright spots. India has seen net foreign buying of $5.68 billion so far in November, and HSBC's Herald van der Linde said the bank upgraded India to overweight on resilient earnings and more reasonable valuations.

The wider AI question

The October exodus fits a broader debate about whether AI spending is running ahead of profits. We have followed that theme in our reports on the Anthropic IPO and on Nvidia H200 chips reaching China, and in earlier coverage of a tech stocks plunge. For Thai corporate results, see our update on Central Pattana's revenue.

Investors should note that outflow data is a snapshot of one month and can reverse quickly. Still, with the biggest chip markets in Asia seeing record selling, the question for November is whether foreign money returns or keeps moving elsewhere.

The original report was published by the Bangkok Post.

Image: Market data screens at the Taiwan Stock Exchange, where foreign selling hit a record in October, a key factor behind the Asian equities outflow. Photo by the Office of the President, Republic of China (Taiwan) via Wikimedia Commons, CC BY 2.0.