EM Asia Markets Experience Foreign Selling Amid Last Week’s Rout; China Hard Hit – GS

Emerging markets in Asia experienced significant foreign sell-offs last week, according to analysts from Goldman Sachs. The bulk of these outflows originated from mainland Chinese markets, amid ongoing concerns regarding the country’s economic stability.

Overall, Asian emerging markets faced total outflows amounting to $6.5 billion. This was primarily driven by a $2.1 billion exit from China’s A-Shares market and an additional $2 billion from Taiwan. South Korea and India also reported outflows exceeding $1 billion each.

These outflows coincided with a period of heightened risk aversion in the markets, triggered by worries about a potential recession in the U.S. and hawkish indications from the Bank of Japan. While many regional markets managed to recover a substantial portion of their losses, China’s markets continued to underperform compared to their peers.

China’s key stock indexes remained near six-month lows, reflecting a lack of bargain-hunting interest as a series of disappointing economic indicators for July dampened confidence in the nation’s prospects. Furthermore, major political meetings held in China offered few insights regarding potential policy support for the economy.

Despite the sustained outflows from Chinese A-shares, there was a notable $2 billion influx into Hong Kong’s markets last week. Stocks in Hong Kong have generally outperformed those on the mainland, recovering from near four-month lows, particularly due to increased buying interest in major internet companies like Tencent and Alibaba.

Both companies are scheduled to release their earnings reports for the June quarter this week.