Foreign investors have withdrawn more than $3 billion from Asian stock markets since the beginning of October. So far, markets in India, South Korea, Thailand, and Vietnam have been hit hardest by net capital outflows.
A total of $3.35 billion has been achieved so far (as of October 5) by net outflows of foreign capital from stock markets in the Asian region. Foreign investors withdrew from countries such as India, South Korea, Thailand, Indonesia, Taiwan, the Philippines and Vietnam, Reuters reported. For all of September, net outflows were just under $3 billion.
Investors cited concerns about inflation and the reaction of local central banks to high price increases as the main reason. They could raise interest rates, which would mean strangling the liquidity that flows into the financial market and is one of the engines of growth in stocks and other types of securities.
Last but not least, the rise in interest rates also poses a risk to the economic recovery, which could slow as a result. Higher interest rates will make loans more expensive for households and businesses, which would ultimately mean cooling aggregate demand. In retroad, this could negatively affect the performance of exchange-traded firms and contribute to deepening bad market sentiment.
