Foreign outflows from Asian equities were biggest in at least 7 years in 2018 as Sino-US trade war and slowing profits battered regional stocks last year.Data from South Korea, Taiwan, India, Thailand, Philippines, Indonesia and Vietnamese stock exchanges showed foreigners sold a net $33.6 billion worth of equities last year, which was biggest since at least 2012."2018 had been of little doubt a turbulent year, underscored by worries over US-China trade relations and growth among others," said Jingyi Pan, a Singapore-based market strategist at trading and investments provider IG.Taiwan led regional equities outflows with net sales of $11.7 billion last year, followed by Thailand and South Korea which saw outflows of $8.9 billion and $5.6 billion, respectively.Net foreign flows turned negative for first time in three years in 2018.
In a tit-for-tat trade war, United States and China imposed tariffs on each other's imports last year, which triggered concerns about region's growth outlook and pulled down Asia's major stock indexes.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 16 per cent in 2018, its sharpest drop since 2011.
Chinese shares were biggest losers in region, shedding about 29 per cent in dollar terms.Regional economic growth is expected to cool further in 2019 amid softening domestic and export demand, but much will depend on how long it will take China to stabilize its cooling economy and whether Washington and Beijing can end their trade war.
In China, Caixin/IHS Markit PMI slipped into contraction territory in December for first time in 19 months.But sharp selloff in Asian equities last year has made them cheaper in terms of price valuations and could lure investors back, some analysts said.
"Asian equities are expected to see better interests into 2019 from improved attractiveness from a valuations perspective and outlook.
This is particularly with Fed hike pace easing and greenback paring in strength expected." said IG's Pan.
The forward price-to-earning ratio of MSCI Asia ex-Japan index was 11.5 at end of 2018, lesser than its 10-year average of 12.4.Niall MacLeod, a strategist at UBS Equities, said in a note that Asian equities have already discounted a lot of slowdown that he expects."In short-term term, trade uncertainty is likely to contain upside.
As year gathers steam we think that Chinese policy moves from headwind to tailwind, tariff impact wanes, Asian growth troughs and sequentially improves from Q2," said MacLeod."Against this backdrop, we think equities will re-rate."