FII inflows into Asian equities strongest since Sept 2013, suggests renewed confidence

In March, FIIs purchased Asian equities worth USD12.3bn, the highest monthly inflow seen since September 2013. Most of the inflow went to Taiwan (USD4.9bn), India (USD3.4bn) and Korea (USD2.9bn). ASEAN markets also received a fair share of the equity flows. As a result of this, for the first time in 2016, year-to-date flows into Asian markets were positive, with the region receiving USD6.6bn.

Increased risk of a Chinese hard landing, a steeper US Fed rate hike trajectory and a further downside in commodities had kept volatility in EM Asian markets elevated. Now, with some of these fears behind us, renewed confidence was seen building up among FIIs.

Meanwhile, mutual funds have yet to warm up to EM Asian equities, as they sold USD1.8bn worth of Asian ex-Japan equities in the last four weeks (ending 30 March 2016). EM Asian markets are likely to see higher inflows in coming months.