By Gaurav Dogra

(Reuters] – Asian equities experienced heavy foreign outflows from the beginning of February due to worries about China’s real estate sector as well as expectations that central banks would soon increase interest rates in response to rising inflation.

As of Oct. 5, foreigners sold an aggregate net of $3.35 trillion in Asian equity this month, according to data from the stock exchanges of India, South Koreaw and Thailand.

Cross-border investors bought Asian stocks worth $2.9 billion last month. This was the largest inflow of 2020 data shows.

“For Asia, the combination of increasing uncertainty in China’s growth and a mega Chinese developer entering into distress has brought a lot of uncertainty in the market ” said Chang Wei Liang, Credit & FX Strategist at DBS Bank.

China Evergrande Group’s liabilities amount to $305 Billion. This has raised concern that China Evergrande Group’s cash crunch may spread throughout China and cause havoc globally.

(GRAPHIC: Foreign investments in Asian equities – https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrrnnbvm/Foreign%20investments%20in%20Asian%20equities.jpg)

(GRAPHIC: Foreign outflows from Asian equities in October – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkjrjrpx/Foreign%20outflows%20from%20Asian%20equities%20in%20October.jpg)

The outflows of $762 millions and $2.13 trillion respectively from the South Korean and Taiwanese stock markets this month were significant.

Petroleum prices are at their highest point since November 2014. There have been concerns about spiralling fuel costs leading to central banks raising interest rates to counter rising inflation.

Investors also waited anxiously for a U.S. payrolls report that was due at the end this week. This could help to support the Federal Reserve’s case to taper stimulus next month.

Asian equity markets saw massive outflows after the Federal Reserve reduced its asset purchases in 2013. This prompted investors and other risk-averse assets to be sold.

“However, the Asian economies’ current accounts are far healthier and forex reserves are far larger today than in 2013,” said Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas (OTC:).

“Improved market access (through Stock Connect for instance) and new IPOs (by way of “homecoming” in HK/China and listing of he digital space in India and Indonesia) should sustain foreign investors’ interest in key Asian markets,” he said.

Inflation in Indonesia was $306 millions, and Indian stocks received $1.8 billion of foreign funds.