Foreigners Pull Record $5 Billion as Southeast Asia Stocks Sink

  • Exodus spurred by concern over growth outlook, U.S. rates
  • Selloff to continue, says One Asset Management's Win

Foreign investors are selling Southeast Asian stocks at the fastest pace on record as the region’s economic outlook worsens and the U.S. gets closer to raising interest rates.

Overseas funds unloaded a net $5.1 billion of Indonesian, Thai and Philippine shares in the third quarter as the MSCI Southeast Asia sank 20 percent. The combined outflows are the largest since Bloomberg began collecting the data in 1999.

Record-low U.S. borrowing costs fueled gains of more than 200 percent in the three nations’ benchmark equity gauges in the six years through 2014, as investors seeking riskier assets poured $16.3 billion into stocks. The deepening slowdown in China’s economy, the largest in Asia, is roiling emerging markets and spurring a commodity rout.

“These three markets will see more outflows,” said Win Udomrachtavanich, Bangkok-based chief executive officer at One Asset Management Ltd., which oversees about $3.5 billion of assets. “Their economies are being hurt by the global economic slowdown and commodity-price slump. Weaker currencies have also encouraged most investors to withdraw money.”

The Indonesia rupiah has fallen to 17-year lows, limiting scope for the central bank to cut interest rates amid the slowest economic expansion since 2009. Most Thai economic indicators have weakened this year as exports shrink and the military government struggles to spur local demand. The Asian Development Bank this month cut its 2015 growth forecast for the Philippines, where net foreign direct investment slid 40 percent in the first six months of the year.

Federal Reserve Chair Janet Yellen reiterated last week the central bank’s stance that higher interest rates are likely appropriate later this year. There’s a 41 percent probability the Fed will raise rates by its December meeting, according to futures data compiled by Bloomberg.

Foreigners have withdrawn a net $1.2 billion from Indonesia shares this quarter, the biggest selloff in two years. The Jakarta Composite Index dropped 14 percent in the period, the biggest loss since 2008, while the rupiah has tumbled 9 percent.

Outflows from Thai stocks reached $2.6 billion as the SET Index dropped 10 percent and the baht sank 6.9 percent. The Bank of Thailand on Friday cut its 2015 economic growth forecast to 2.7 percent as exports and domestic consumption weaken.

In the Philippines, international investors have pulled $1.3 billion from shares, a quarterly record. The benchmark Philippine Stock Exchange Index has dropped for sixth straight months, the longest losing streak in 13 years, while the peso declined 3.5 percent.

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