Foreign investors are piling money into major Asian equity markets outside of China at the fastest pace in seven years this quarter, as vaccine successes add to the global risk-on mood.
Nine regional stock markets have lured a combined about $48 billion since Oct. 1, the most since the fourth quarter of 2013, according to data compiled by Bloomberg. Japan is leading the way with $27.4 billion, followed by India at $9.2 billion. South Korea has received $6.4 billion.
A series of encouraging results from vaccine makers have lent fresh impetus to the Asian equity rally spurred by Joe Biden's victory in the U.S. Presidential election and the signing of a regional trade pact. Benchmark stock indices in India and South Korea hit all-time highs this month, while in Japan the Nikkei 225 Stock Average has surged to a 29-year peak amid a rotation into cheap cyclical shares.
"A catch-up rally may continue as investors reshuffle their portfolio in favour of cyclical sectors, which are perceived to benefit most from recent vaccine breakthroughs," said Margaret Yang, a strategist at DailyFX. "A relatively well-handled pandemic situation across Asia-Pacific may have also boosted investment confidence in the region."
Meanwhile, Asian shares' better overall performance this month — including Chinese stocks — has helped the region overtake the U.S. in terms of year-to-date gains. The MSCI Asia Pacific Index is now up 12% in 2020, versus an advance of close to 11% for the S&P 500 Index.
The inflows also show that investors are positioning for an earnings recovery, according to Kieran Calder, head of Asia equity research at Union BancairePriveeUbp
SA. (Bloomberg)
