Asian equities experienced their largest foreign capital exodus in nearly six years in November, as investor concerns over high valuations in tech stocks triggered a broad sell-off.
Data compiled on December 11 shows foreign investors pulled a net $22.2 billion from Asian markets including South Korea, India, Thailand, Indonesia, Vietnam, and the Philippines—marking the biggest monthly outflow since March 2020's $33.32 billion net selling. South Korea alone recorded $9.75 billion in net foreign outflows, the highest since March 2020.
Analysts note this withdrawal wave reflects growing skepticism about the sustainability of the AI-driven market rally, prompting investors to reduce concentrated positions in select AI-related plays.
Herald van der Linde, HSBC's Head of Asia-Pacific Equity Strategy, stated the trend signals rising unease about the longevity of the AI boom. He warned even minor deviations from sky-high expectations could trigger significant market swings.
Despite the massive outflows, the MSCI Asia Pacific Index has gained 23.13% year-to-date, on track for its strongest annual performance in eight years—underscoring resilient fundamental support.
**Tech Concentration Risks Spark Foreign Exodus**
Extreme positioning in a handful of AI trades emerged as the primary catalyst for November's withdrawals. Van der Linde observed: "Investors built exceptionally concentrated positions in select AI plays, making markets vulnerable to outsized reactions when reality falls slightly short of euphoric expectations."
This crowding effect amplified the sell-off as tech valuations came under scrutiny. South Korea, a global semiconductor hub, bore the brunt with $9.75 billion in foreign outflows—a five-year high.
India, Thailand, and Vietnam saw respective net foreign outflows of $425 million, $388 million, and $286 million—markets that previously benefited from the global tech chase in emerging economies.
In contrast, Indonesia and the Philippines attracted $731 million and $59 million in net foreign inflows respectively, suggesting investors are rotating away from tech while seeking regional alternatives.
**Long-Term Optimism Persists**
Despite near-term turbulence, institutions remain bullish on Asia's medium-term outlook. Goldman Sachs expects hyperscale cloud providers to sustain heavy AI infrastructure investments through 2026-27, potentially keeping chip supplies tight and supporting Asian semiconductor earnings—even if an AI bubble forms.
Mike Shiao, Invesco's Chief Investment Officer for Asia ex-Japan, noted: "Asian markets demonstrated resilience in 2025, buoyed by policy support, robust domestic demand, and AI-driven innovation in key markets. With the dollar likely to extend its weakening trend—historically favorable for Asian equities—we maintain constructive views."
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