Foreign Investors Return to Asian Equities, But Tariff Uncertainty Casts a Shadow

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Asian equity markets attracted net foreign inflows for a second consecutive month in June, supported by optimism over potential U.S. interest rate cuts and a weaker dollar. However, growing concerns over escalating U.S. tariff threats limited the momentum.

According to LSEG data, foreign investors bought a net $6.02 billion worth of equities across seven major Asian markets—Taiwan, South Korea, India, Thailand, Indonesia, Vietnam, and the Philippines—in June. While still positive, this marked a decline from $10.65 billion in May.

The MSCI Asia ex-Japan Index rose 5.33% in June, posting its strongest monthly gain since September 2024 and outperforming the MSCI World Index, which advanced 4.36%.

Investor appetite for AI-related technologies continued to drive foreign investment, particularly in Taiwan and South Korea, which recorded net inflows of $3.22 billion and $2.01 billion, respectively. Strong performance by U.S. chipmakers Nvidia and Broadcom further fueled confidence in Asia’s tech-heavy markets.

India also remained a favored destination, with foreign investors purchasing $1.69 billion in local stocks—the third straight month of net inflows.

Conversely, markets in Indonesia, Thailand, Vietnam, and the Philippines saw net outflows totaling over $900 million in June, as investors remained wary of economic headwinds and geopolitical risks.

Despite the positive momentum, uncertainty around U.S. trade policy continues to weigh on sentiment. The U.S President Donald Trump recently delayed a major tariff decision to August 1, while simultaneously escalating tensions by announcing steep duties on key imports—including a 50% tariff on copper and increased levies on exports from Japan and South Korea.

Analysts warn that further tariff hikes could dampen the region’s investment outlook, though some, including Goldman Sachs, believe that final tariff decisions may serve as a “clearing event” for markets—even if the imposed rates exceed expectations.

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Source: Vietnam Insider