Foreigners cash out of key Asian emerging markets before US Fed meet

Foreigners are cutting and running in some key Asian emerging markets amid turbulent trading ahead of this week’s US Federal Reserve meeting, where policymakers are expected to signal an interest-rate lift-off in March.

Overseas funds have sold a net $3.1 billion worth of shares in Taiwan, South Korea, and India so far this week, according to the latest available data compiled by Bloomberg. That follows $4.9 billion of withdrawals last week — the largest since August.

“Coupled with the rise in geopolitical risks (Russia–Ukraine) that may keep energy costs high in the near term, risks are fairly high for now and it’s not surprising to see money being taken off the table,” said Lorraine Tan, director of Asia equity research at Morningstar.

The MSCI Asia Pacific Index has lost more than 5 per cent in two weeks, as rising bets on faster-than-expected monetary tightening and heightened tensions over Ukraine roiled global

stock markets.

Benchmarks in Taiwan and Korea have suffered with their large technology (tech) exposure, with the sector bearing the brunt of the sell-off as bond yields rose. “Foreign investors seem to have started reducing risky assets as they gauge the Fed’s monetary tightening,” said Hyun Choi, head of equity at Baring Asset Management Korea.