Emerging Asia faces massive foreign investment outflows on US tariff woes

People cross a street near office towers in the Lujiazui financial district in Shanghai, China, February 28, 2023. — Reuters

Emerging Asian equity markets, excluding China, faced massive foreign investment withdrawals in February, driven by concerns over US President Donald Trump’s tariff policy and its potential to disrupt global economic growth.

Last month, foreign investors withdrew $13.72 billion from equity markets in India, Taiwan, South Korea, Thailand, Indonesia, Vietnam, and the Philippines, following net sales of about $12.5 billion in January.

The year “has started on a turbulent note, with investor sentiments rattled by concerns over US tariff risks, US growth, and weak market seasonality,” said Yeap Jun Rong, a market strategist at trading platform IG.

This week, US President Donald Trump imposed 25 per cent tariffs on imports from Mexico and Canada, raised tariffs on Chinese goods to 20 per cent from 10 per cent, and announced that further “reciprocal tariffs” and non-tariff measures would take affect on April 2. The regional sell-off was exacerbated by a downturn in tech stocks, especially those supplying chips to US vendors benefiting from AI advancements, disrupted by China’s economical AI model, DeepSeek.

Last month, Taiwan stocks saw $5.05 billion in foreign outflows, marking the largest monthly net sales since November 2024, while South Korea experienced its seventh consecutive month of net outflows, totalling about $2.85 billion. Indian equities saw a net $3.98 billion in selling last month, following outflows of about $9.04 billion in January.

Due to the success of DeepSeek AI, foreign investors are re-evaluating the investment allure of equities in India compared with China, with MSCI India underperforming MSCI China by more than 18 per cent in February 2025, said Jason Lui, head of APAC equity and derivative strategy, BNP Paribas. Offshore China equity funds received about $3.07 billion worth of inflows last month, according to data from LSEG Lipper. Herald van der Linde, head of equity Strategy at HSBC Asia Pacific, said India’s high import tariffs, especially on US products, expose it to potential reciprocal tariffs from the Trump administration.

Equities in Indonesia, Vietnam, Thai and the Philippines also saw outflows of $1.11 billion, $388 million, $198 million and $145 million, respectively, last month.