Last week saw the largest pullout from global emerging-market equity funds in 14 months, with the total reaching US$1.8 billion, as sovereign debt problems in Europe rattled investor confidence, Citigroup said in a report on Friday.
Net outflows from Asia-Pacific equity funds have reached US$122 million so far this year, representing the largest outflow among all the emerging market equity funds, said the report, co-authored by Hong Kong-based analysts Elaine Chu and Markus Rosgen of Citi Investment Research.
“[The] Year of the Ox ended with increased outflows from Asian funds,” Chu and Rosgen said in the weekly report, based on data compiled by EPFR Global, a Cambridge, Massachusetts-based research company.
The Citigroup analysts said all equity funds investing in the Asia-Pacific region suffered from redemptions, except Taiwan funds.
So far this month, net outflows from Asian equity funds have reached US$1.2 billion, following two consecutive weeks of redemptions, with combined outflows from China and India funds averaging about US$300 million per week in the last two weeks, they said.
Fears about a eurozone debt default, coupled with concerns over China’s earlier-than-expected credit tightening, have caused stock markets across the Asia-Pacific region to drop more than 8 percent since last month’s peak.
The benchmark MSCI Asia Pacific Index, which tracks regional equity markets through a weighted compilation of various indexes, had fallen by 8.19 percent to 116.39 on Friday from 126.77 on Jan. 15, Morgan Stanley Capital International Barra data showed.
China’s Shanghai Composite index, which closed below 3,000 on Jan. 27 for the first time in three months, has dropped 7.9 percent since the beginning of the year. Hong Kong’s Hang Seng index has fallen by 11 percent since its November high, and Taiwan’s TAIEX has retreated by 10.95 percent to 7,441.84 on Feb. 10 — the last trading day before the Lunar New Year holiday — from last month’s peak of 8,356.89 on Jan. 15.
In Japan, the benchmark Nikkei 225 Stock Average index has lost more than 9 percent since its peak in the middle of last month and South Korea’s Kospi index has shed more than 6.5 percent over the same period. Bourses in both Australia and New Zealand have lost around 7.5 percent since their peaks in the meantime.
While fears of a debt default in some parts of Europe seemed to have unsettled investor confidence, Moody’s said the outlook for the Asia-Pacific region was still broadly positive, albeit with downside risks.
“Economic fundamentals across the region are strong, with data showing regional economies are expanding, which should support demand for regional assets,” Matthew Circosta, a Sydney-based economist of Moody’s Economy.com, wrote in a report on Friday.
But it would not be all smooth sailing for Asia-Pacific markets this year.
“The outlook for the region is broadly positive, but depends heavily on recovering consumer demand from the US and Europe and a strengthening Chinese economy — ingredients which are vital for the region to enjoy sustainable expansion,” Circosta wrote.