By Gaurav Dogra
South Korea and Taiwanese equities experienced a huge influx of foreign investment during May, driven by a surge of interest in artificial intelligence (AI) and the subsequent demand for shares of hardware exporters in the region.
Data from stock exchanges in South Korea, Taiwan, India, Indonesia, the Philippines, Thailand and Vietnam showed foreigners purchased a net $11.74 billion worth of regional equities in May - the biggest amount since November 2022.
Specifically, Taiwanese equities attracted a massive inflow of $4.4 billion, followed by South Korean equities with $3.1 billion. The two markets accounted for about 64% of the region's total inflows last month.
The rise of ChatGPT, launched last year, has propelled the AI frenzy and sparked a global rally in chipmaker stocks.
"The chase for semiconductor stocks on optimism surrounding AI demand has been a key theme for investors, and South Korea and Taiwan’s significantly higher exposure to that industry may account for the larger amount of net inflows as opposed to the rest of the region," said Yeap Jung Rong, market strategist at IG.
Meanwhile, foreigners secured a net $5.3 billion worth of Indian stocks, their biggest monthly purchase since August 2022, boosted by its strong economic growth in the March quarter.
"The GDP growth print was a significant positive surprise, and strong bank credit growth and GST collections are underscoring robust corporate growth outlook, we believe," said Manishi Raychaudhuri, Asia-Pacific head of equity research at BNP Paribas.
On the other hand, Thai, Vietnamese and Philippine equities faced outflows of $995 million, $134 million and $81 million, respectively, last month.
In contrast to the significant sell-off in 2022, foreign investors have been net buyers of Asian equities this year, buoyed by expectations that the Federal Reserve would adopt less aggressive monetary tightening measures to combat inflationary pressures.
A string of economic data, along with last week's dovish rhetoric from Fed officials, has emboldened bets that the Fed will likely refrain from lifting rates at its June 13-14 meeting.
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Simon Cameron-Moore)