Escape from the US stock market! Investors flock to buy Asian funds
Data shows that in the three weeks ending May 7, the total net inflow into exchange-traded stock funds investing in Asia reached USD 8.45 billion, setting a record high in about seven months. Meanwhile, U.S. stock funds experienced capital outflows for the fourth consecutive week, with tariff policies being a key factor undermining investor confidence
As Trump's tariffs cast a shadow over the U.S. economic outlook, investors are aggressively selling U.S. stocks and reallocating funds into Asian equity funds.
Data from LSEG Lipper, covering 844 funds globally, shows that in the three weeks ending May 7, net inflows into Asian exchange-traded funds (ETFs) totaled $8.45 billion, marking the highest level in about seven months.
Meanwhile, U.S. equity funds have seen outflows for the fourth consecutive week, totaling $43.5 billion as of May 7.
The tariff policies of the Trump administration are a key factor undermining investor confidence. Concerns about the U.S. economic growth outlook are growing, prompting investors to reassess the long-term return potential of the U.S. market.
Asian Markets Outperform, Beat U.S. Stocks
Data shows that the MSCI Asia-Pacific Index excluding Japan has risen over 4% this year, while the S&P 500 and Nasdaq indices have fallen nearly 4% and 7%, respectively. The one-year expected price-to-earnings (PE) ratio for Malaysia's benchmark index is 17.56, compared to 20.62 for the S&P 500.
The recent performance of Asian markets and currency appreciation have also increased their attractiveness to foreign buyers. Prashant Bhayani, Chief Investment Officer at BNP Paribas Wealth Management, stated:
"People are increasingly aware of the need for portfolio diversification and concerns about over-concentration in the 'Magnificent 7' stocks, which is driving funds towards non-U.S. markets, including Asia."
Additionally, the valuation advantage of Asian markets has prompted investors to shift funds to the region. Investors believe that Asian countries may reach trade agreements or benefit from new trade routes that circumvent U.S. tariffs.
Gary Tan, a portfolio manager at Allspring Global Investments, recently purchased some ASEAN stocks, believing they offer good value.
Sunil Koul, a global emerging markets equity strategist at Goldman Sachs, stated:
"We believe that the demand for diversification away from U.S. assets is growing, the dollar will gradually depreciate to its long-term fair value, and combined with lower valuations and lighter positioning, these factors are favorable for Asian stock markets."
