Foreign funds invested $240.3 million in India in August 2003, the highest level since October 2001.
India-dedicated country funds, set up for foreign investors to invest in India, pumped in a net $76.1 million into India in August. Another $58.3 million came from equity funds dedicated to investing in Asia (excluding Japan).
These funds increased their holdings in Indian companies by about 9 per cent in the period, according to Emerging Portfolio.com Fund Research. Global emerging markets equity funds chipped in with $66 million of investments in India, with international funds accounting for the rest.
Foreign equity fund managers tracked by EPFR ploughed in a net $2 billion into Taiwan equities this year. They have also been strong buyers of stocks in Korea and China. More than half of this new buying has taken place over the last couple of months, the EPFR says in its latest report.
On a regional basis, fund managers have been aggressively buying Asian equities and selling Latin American stocks, according to the monthly country flows data released by EPFR.
"The combination of heavy inflows into dedicated emerging market funds that are mandated to invest in Asia, low valuations on an historical basis, and the cyclical nature of most Asian markets have together encouraged funds to put a considerable amount of fresh money to work throughout Asia," the EPFR media release said.
"Some (GEM funds) have been funding this activity (buying in Asia) by selling Latin assets such as Mexican equities. The new buying has contributed to a solid market performance throughout Asia that has seen the MSCI Asia index rise 37 per cent in the current year to date," the release added.
EPFR tracks the net buying and selling of equities by country for 844 international, global emerging markets, Asia ex-Japan, Latin America, and dedicated country funds with a total $175 billion in assets.
The dedicated emerging markets and international/global funds tracked by EPFR have been buyers of about $7.8 billion in Asian equities this year while selling a net $1.5 billion in Latin American stocks.
Their activity in the Emerging Europe, Middle East and Africa region has been flat in the aggregate, as fund buying of South Africa and Israeli equities has been counterbalanced by their selling of Russian and Hungarian stocks.
Taiwan has been the favourite venue for emerging market portfolio investors this year. Of the $1.94 billion in net purchases of Taiwan equities so far, more than one-third came in August.
GEM equity funds accounted for about $512 million of the $748 million net buying in August, which was the most aggressive foreign buying of Taiwan equities since March 2000.
Taiwan's attraction has been the result of a recovering global technology sector and the relaxation of restrictions on foreign institutional investors. From the funds it tracks, EPFR estimates that a total of $3 billion to $5 billion in foreign portfolio flows will go to Taiwan in the second half of 2003.
Meanwhile, Korea has received $904 million in net buying over the last three months despite the economy falling into a technical recession in the second quarter (April-June) of the current year.
Fund buying of Korean equities was stimulated by a 25 basis point (bp) rate cut, lower delinquency ratios from domestic banks and positive corporate earnings results. Korea has seen the second strongest net buying, after Taiwan, in the past three months.
Elsewhere in Asia, Malaysia has seen substantial buying from foreign portfolio investors recently, amounting to $452 million over the last three months.
This represents an addition of about 23 per cent to their total holdings in Malaysian companies during the three-month period.
Funds have bought Malaysian equities on expectations that the government will be successful in boosting the economy and further that the corporate performance in this laggard regional market will catch up with the rest of Asia.
Interestingly, Malaysia has been the worst performing market in Asia in the current year-to-date, but the 7.6 per cent rise in the MSCI Malaysia Index so far in October is the third best in the region.
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