MSCI Asia ex-Japan index slips 10.2% in August

The MSCI Asia ex-Japan index registered an over 10 per cent fall in August this year, its biggest drop since October 2008, as markets witnessed massive foreign equity outflows, says a report by Macquarie.

According to global research firm Macquarie, the 10.2 per cent fall in August made it the worst month for Asia ex-Japan equities since October 2008, when it fell by 24 per cent.

Export-focused markets bore the brunt of the August correction, with the MSCI Korea registering a fall of 12.4 per cent, while the MSCI Singapore dropped by 10.7 per cent, the report added.

However, Macquarie believes that “the market’s latest correction has ultimately improved the attractiveness of Asian equities by driving valuations lower’’.

Though none of the markets escaped the downdraft in absolute terms, some were relatively insulated than others.

The US monetary policy-linked Hong Kong market and more domestically driven, or merely less-liquid, ASEAN markets led by the Philippines — which were down by 6.5 per cent and 4.3 per cent, respectively —— were the two outperformers, the report said.

A sectoral analysis shows that food/staples retailing, household/personal products and telcos were among the key sectoral outperformers. By contrast, capital goods, materials and tech were among the worst performers.

During the month of August, net-selling of regional equities (Asia ex-Japan) stood at $16.1 billion, wherein Taiwan and Korea together recorded $11.5 billion in foreign net sales, while India recorded $2.2 billion and Thailand, Indonesia and the Philippines together recorded $2.5 billion in net sales.

“Asia ex-Japan markets suffered their third-highest level of foreign equity outflows on record — with North-East Asia seeing the bulk of exodus, while South-East Asia and India proved comparatively immune,” Macquarie said.

Saying that the Asia ex-Japan markets’ latest correction has ultimately improved the attractiveness of Asian equities, Macquarie said: “The prospect of further modest firming in US data and some Chinese policy easing skew market risks moderately to the upside through end-year.”

Meanwhile, nearly all Asian currencies depreciated against the US dollar in August, except the Chinese renminbi (RMB).

China allowed the RMB to appreciate by 0.9 per cent during August — the strongest month since December 2010. The Japanese yen also rose 0.9 per cent vis-a-vis the US dollar during the month, the report said.

However, elsewhere in Asia, local currencies fell amid heavy equity outflows, led by the Indonesian rupiah (down 4.2 per cent) and the Indian rupee (down 1.2 per cent), it said.

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