Asian equities witness over $10 billion foreign outflows in November as AI rally stalls

Nov 12 (Reuters) - Asian equities witnessed steep cross-border outflows in the first week of November as investors booked profits on caution over lofty tech valuations and uncertainty about the sustainability of an extended market rally.

Foreigners divested approximately $10.18 billion worth of stocks in Taiwan, South Korea, India, Thailand, Indonesia, Vietnam and the Philippines for the week ended November 7 in a turnaround from $2.28 billion worth of net purchase in October, data compiled by LSEG showed.

South Korean stocks witnessed roughly $5.05 billion net foreign outflows last week, reversing $4.21 billion inflows for the prior month.

Taiwan stocks saw $3.86 billion net cross-border sales, exceeding $3.21 billion outflows for October.

"Foreign outflows in Korea and Taiwan equities are primarily driven by the weakness in leading AI-related companies, which is consistent with the global headwinds across other markets such as Japan and the US," said Jason Lui, the head of APAC equity and derivative strategy at BNP Paribas.

The MSCI's Asia ex-Japan information technology sector index .MIAX0IT00PUS lost 4.23% last week after registering 62.5% gains in the six-month period through October. The MSCI's global information technology sector index .MIWD0IT00PUS shed 4.38% in the previous week.

"Renewed worries over elevated tech valuations have triggered volatility, but solid fundamentals suggest current levels are justified," said Mark Haefele, chief investment officer, UBS Global Wealth Management.

"We forecast an earnings growth of 15% for global tech this year, followed by a solid 12.5% increase in 2026."

LSEG data showed that the MSCI Asia Pacific ex-Japan index .MIAPJ0000PUS had a 12-month forward PE ratio of 15.81, as of end-October, the highest since June 2021.

Indian equities, meanwhile, saw a net $1.42 billion foreign outflows last week after securing $1.66 billion in inflows in October.

"India is now the biggest underweight in GEM portfolios and only a quarter of funds we track are overweight India vs their benchmark," according to an HSBC report last Friday.

"We see India as a good AI hedge and provides diversification for those who feel uncomfortable with the AI rally. India will be an outsized beneficiary of any additional money coming into the EM region," the report said.

Vietnam and Thai stocks also saw foreign outflows of $95 million and $40 million, respectively, while Indonesia and the Philippines attracted inflows of $207 million and $77 million, respectively, in the previous week.

Monthly foreign investment flows into Asian equities