Foreign investors trim Asian stock holdings

Foreign investors were net sellers of Asian equities in December as they booked profits, however, analysts expect inflows into the region to pick up this year. December data from seven Asian exchanges showed foreign outflows for the month totalled about $3.7 billion. For 2017, the region received $20 billion in foreign money.
Jingyi Pan, market strategist at IG markets in Singapore, said profit taking had been a key reason for the offloading of Asian equities in December. However, she doesn't expect this trend to persist in 2018. "The momentum may even pick up as investors turn to look at the cheaper alternatives to the likes of the US market," said Pan.
Despite a big stock rally last year, Asian shares are still cheaper than stock markets in the United States and Europe. Asia's forward 12-month price-to-earnings ratio stood at 15.3, against North America's 22.3 and Europe's 17, according to Thomson Reuters data. Asian stocks have started this year on a positive note, with MSCI's broadest index of Asia-Pacific shares outside Japan rising more than 3 percent already. The index rose more than 33 percent in 2017.
Expecting higher exports in Asia, driven by a synchronised global recovery, analysts are raising their 2018 earnings outlook for Asian companies. Over the past month, analysts have increased their earnings forecasts for Asian companies by 1.5 percent, with India, Vietnam and South Korean companies seeing the biggest upgrades.
DBS Bank expects Asian markets in aggregate to have returns of 3-15 percent in 2018 in local currency terms, excluding dividends. However, analysts believe major central banks' more aggressive monetary policies could be a risk for foreign flows this year.
The recent US jobs data showed gains in monthly wages in December, which could pave the way for the Federal Reserve to increase interest rates in March. "The only concern (for Asian equities) may be the degree of volatility that central banks' tightening could bring to the relatively riskier Asia market that may dent sentiment and fund flows," said IG markets' Pan.