Foreign investors pull $25.5B from Asian stocks for ninth straight month

Foreign investors sold a net $25.48 billion worth of stocks across seven Asian markets in July, marking a ninth consecutive month of outflows as concerns over AI spending and semiconductor valuations drove heavy selling in Taiwan and South Korea, according to Reuters citing LSEG data.reuters

Taiwan accounted for $22.95 billion of the outflows — nearly 90% of the total — following roughly $8 billion in net selling in June. South Korea recorded $6.26 billion in foreign outflows, its third straight month of net selling. Together, the two markets saw $29.21 billion exit, more than the regional total due to offsetting inflows elsewhere.ts2+1

AI Doubts Trigger Tech Selloff

The selling was concentrated in technology-heavy markets exposed to the AI and semiconductor supply chain. BNP Paribas analysts said in a July note that "AI heavyweights in South Korea and Taiwan faced massive selloffs as investors started to question their chip-demand forecasts and debt-repayment ability." The analysts added that China's Moonshot announcement about low-cost AI models "aggravated negative market sentiment."reuters

Taiwan's TAIEX suffered its largest-ever single-day point decline on July 17, falling 2,953.71 points or 6.47%, as Taiwan Semiconductor Manufacturing Co. ↗ 0.86% dropped more than 7% during the session. South Korea's Kospi had crossed 9,000 points for the first time on June 18 before the reversal took hold, with Samsung Electronics and SK hynix ↗ 4.70% accounting for more than half of the index's value during the rally.ibtimes

South Korean regulators responded by tightening rules on single-stock leveraged ETFs and ETNs in mid-July, citing annualized volatility of 113% for SK hynix and 96% for Samsung Electronics.ibtimes

India Emerges as Relative Winner

While Taiwan and South Korea hemorrhaged capital, India attracted $2.12 billion in inflows and Thailand drew $1.46 billion. Indonesia and the Philippines logged smaller inflows of $88 million and $69 million, respectively.reuters

Herald van der Linde, head of Asia-Pacific equity strategy at HSBC ↘ 0.11%, said in a note last week that "the unusually high swings in AI-related sectors are making global investors diversify, and on that measure we think India looks better placed." HSBC recently upgraded India to neutral within Asia.reuters

The divergence suggests a rotation within Asia rather than a wholesale retreat. TSMC's July revenue of NT$467.58 billion represented a 44.7% year-on-year increase, indicating that the correction reflected a reassessment of valuations rather than a collapse in underlying semiconductor demand.ibtimes