Worst outflows in a decade hit Southeast Asia ETFs on trade rift

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HONG KONG (May 16): Overseas investors in Southeast Asian stocks are selling out at the fastest rate in almost a decade, as key markets in the region get caught up in the escalating trade war.

A group of US-listed exchange-traded funds operated by BlackRock Inc’s iShares unit — tracking shares in countries including Singapore, Indonesia, Malaysia, the Philippines and Thailand — posted net outflows of US$86.5 million on May 13, the most since at least September 2010, according to data compiled by Bloomberg.

The cohort also saw its biggest weekly outflow since August 2013, about US$175 million, in the week to May 10, the data show. That same week, investors yanked more than US$200 million from the iShares China Large-Cap ETF, the most since December 2016, as Chinese shares slumped.

Equity markets across Asia have fallen back over the past two weeks as trade tensions between the US and China escalated and fresh tariffs were imposed. The MSCI Asia Pacific Index is down 4.8% so far this month.

Domestic Issues

There are also regional dynamics in play for many of the biggest markets in Southeast Asia.

Indonesia’s Jakarta Composite Index is now down more 3% for the year, the first among Asian markets to wipe out 2019 gains, as investors await the final results of a hotly contested election now mired in dispute, and a current account deficit that widened to a four-year high. That sell-off deepened Wednesday after the nation posted its biggest trade deficit since at least 2008 and sent the benchmark index below the key 6,000 level.

In Malaysia, the FTSE Bursa Malaysia KLCI Index is among the worst-performing equity markets in the world with a 4.7% loss this year. Malaysians are growing discontent with Prime Minister Tun Dr Mahathir Mohamad one year on from his surprising election, as many campaign promises remain unfulfilled.

Meanwhile, the Philippines Stock Exchange Index is mired at a four-month low following midterm elections in which opposition candidates to President Rodrigo Duterte were crushed, raising concerns about political risks over the apparent erosion of democracy in the nation. And export-heavy Singapore’s Straits Times Index has tumbled more than 5% from its year-to-date high in April.