Foreign investors to end buying streak in emerging Asian equities

(Bloomberg) - Global funds are retreating from Asia's emerging markets, with a five-month stock-buying spree ending as expectations for U.S. interest-rate cuts wane.

More reads from Bloomberg.

• Dubai brought to a standstill as clouds of rain worsen flooding

• What if the Fed's rate hike really triggered a boom in the U.S. economy?

• China Tells Iran to Keep Carrying on After Israel Attacks

• Inflation surprises abound as Powell signals delay in rate cuts

• Market Roundup: U.S. Yields Surge 5 Percent on Bauer's Hawkish Approach

Overseas investors made a net sell-off of nearly $2.2 billion worth of stocks in the region's emerging markets, excluding China, in April, according to data compiled by Bloomberg. That would break the longest buying streak since 2017.

Taiwan was the biggest outflow this month, while Korea saw a net inflow during the period. The MSCI EM Asia Index is a hair's breadth away from giving up its year-to-date gains. The index had risen as much as 4.6% on the year before worries mounted last week that the Federal Reserve would delay a rate cut.

After a string of surprisingly high inflation figures, Federal Reserve Chairman Jerome Powell said Tuesday that policymakers will have to wait longer than originally expected before cutting interest rates. Investors are worried that the Fed's delay in cutting rates will force emerging market central banks to follow suit.

The solid US economy and rising oil prices have led to a sustained rise in borrowing rates, which will exacerbate the cost pressures of a stronger US dollar and Asia's reliance on imported energy. The rise in U.S. interest rates has also increased the attractiveness of Treasuries as a safer alternative to equities in the region.

Active emerging-market funds saw $2.7 billion in outflows in March as bets that the Federal Reserve would postpone easing rose, said Jason Ng, a strategist at Morgan Stanley. The funds notably reduced their heavy exposure to technology stocks in Taiwan, while increasing their positions in Saudi Arabia, Turkey and the United Arab Emirates, he wrote in a report.

Most Read by Bloomberg Businessweek

• A very bad week for Tesla, its employees, and even Elon Maas resonance

• Global Economic Recovery Masks Worsening Debt and Inequality

• Cities use artificial intelligence to help ambulances and fire trucks get to their destinations faster

• Pirated Bracelets and $1,150 Jumpsuits Fuel Booming 'Shadow Swiftman Economy'

• Key Takeaways from Business Week's Teen Pornography Extortion Investigation

Copyright ©2024 Bloomberg Intelligence.