Foreigners withdrew money from Asian equity markets for the third consecutive month in April as rising US bond yields and trade tensions between the United States and China soured investors' appetite for riskier assets. Overseas investors sold about $6.5 billion worth of Asian stocks last month, more than triple their sales of $2 billion in March, data from seven stock exchanges showed.
Regional markets have seen total outflows of $11.3 billion in the first four months of this year, compared with net inflows of $20 billion for all of 2017, the data showed. "The accumulation of political and geopolitical tensions doesn't bode well for riskier Asian assets, coupled with the dollar rebound that had been piling on the pressure as well," said Jingyi Pan, a Singapore-based market strategist at trading and investments provider IG.
The dollar index, which tracks the greenback against a basket of six major peers, rose 2 percent in April, its biggest monthly gain in 17 months. The index is up another 1.5 percent so far in May. Taiwan stocks, a favourite of foreign buyers in the last six years, witnessed outflows of 2.8 billion in April to take the year's tally to over $5 billion.
South Korea and Indian stocks saw outflows of $1.7 billion and $850 million, respectively. Singapore Prime Minister Lee Hsien Loong said last month that a mounting trade dispute between the United States and China was one of the most pressing worries for Southeast Asian nations. The Trump administration is threatening to impose tariffs on up to $150 billion of Chinese imports and Beijing has vowed to retaliate.
Creeping gains in US Treasury yields are also fuelling fears that portfolio managers may move money into safer fixed-income securities at the expense of riskier assets like stocks and emerging markets. The US 10-year Treasury yield breached the psychological level of 3 percent in late April and with the Federal Reserve being the only major central bank set to raise interest rates in this quarter most analysts expect further upside in US bond yields.
Another worry for regional markets was the United States pulling out of an international nuclear deal with Iran on Wednesday and the move is seen as disruptive for many Asian companies that have deals with Iran. Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (Opec) and a major supplier, especially to refiners in Asia. IG's Pan said the risk factors for Asian equities "look to be here to stay as we tread into May, which could continue to keep the outflows ongoing."
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