Foreign investors pull out $50 billion from Asian equities in October on AI, cash burn woes

In October, foreign investors divested nearly $50 billion from Asian equities, marking the largest monthly outflow in four months, according to LSEG. The retreat was driven by concerns over hyperscalers' cash burn and potential stricter AI regulations ahead of the US midterm elections. The largest outflows were from South Korea, Taiwan, India, Indonesia, Thailand, Vietnam, and the Philippines, totaling $49.77 billion.

Democrats' wins in the US midterm elections, particularly in states opposing new data centers, intensified these worries.

Exness's lead financial market strategist, Wael Makarem, noted that the outflows stemmed from increased doubts about AI infrastructure spending and profitability. Foreign investors sold $30.68 billion of Taiwanese stocks and $14.59 billion of South Korean shares. So far this month, the two markets have experienced further outflows of $19.76 billion and $8.32 billion, respectively.

Some analysts speculated that foreign investors might be relocating funds from Asia to developed markets, given the MSCI Asia Pacific ex-Japan index's 6.91% decline in October compared to the MSCI All Country World Index's 1.69% decline. Additionally, investors may have shifted allocations to US Treasuries, with the 10-year UST yield reaching 5.3% in early October.

Indian stocks recorded a second consecutive monthly foreign outflow of $3.6 billion, while cross-border investors invested $5.68 billion in Indian equities this month.