Another jumbo interest-rate hike by the Federal Reserve this week may accelerate global funds’ exodus from emerging Asian stock markets that are already reeling from the impact of a stronger dollar.
Foreign investors withdrew from emerging Asian equities excluding China for a fourth straight week, pulling $423 million in the period through Sept 16, according to the latest exchange data compiled by Bloomberg. The longest run of outflows since July has pushed regional currencies to historical lows, further dampening the outlook for stocks.
“The recession risks and severe monetary tightening in developed economies are hampering Asian earnings expectations and emerging market flows like never before,” Manishi Raychaudhuri, BNP Paribas SA’s head of Asia Pacific equity research, wrote in a Sept 17 note. Until there is some visibility about the Fed’s policy path, “there seems to be no respite from outflows in Asian EM,” he wrote.
