Key facts
- Foreign investors sold Asian equities for the ninth consecutive month in July.
- Taiwan and South Korea saw significant outflows due to concerns over AI spending and chip demand.
- Alphabet and Tesla's negative cash flows contributed to market worries.
- Total foreign outflows across several Asian markets reached $25.48 billion in July.
- Taiwan accounted for the largest portion of outflows at $22.95 billion.
- India, Thailand, Indonesia, and the Philippines experienced foreign inflows.
Foreign investors continued their divestment from Asian equities in July, marking the ninth consecutive month of net outflows. The primary drivers were significant selling in Taiwan and South Korea, markets heavily weighted towards technology and AI-related sectors. Concerns over the sustainability of AI spending, coupled with rising cash burn and negative cash flows reported by tech giants like Alphabet and Tesla, fueled investor caution. Analysts from BNP Paribas highlighted that major AI players in Taiwan and South Korea faced substantial selloffs as investors questioned their chip demand forecasts and ability to repay debt. China's announcement of low-cost AI models further dampened sentiment. Overall, foreign investors sold a net $25.48 billion worth of stocks across several Asian markets, with Taiwan alone accounting for $22.95 billion and South Korea for $6.26 billion. Conversely, India, Thailand, Indonesia, and the Philippines saw inflows, partially offsetting the regional withdrawals. HSBC's equity strategy head for Asia Pacific noted that the volatility in AI sectors is prompting global investors to diversify, leading to an upgrade of India to a neutral rating.