By Gaurav Dogra

(Reuters) – Foreigners purchased net Asian equities from December, but this paled against the huge outflows that occurred throughout the year. This was due to a weak dollar and a drop in activity caused by COVID-19-led restrictions.

The largest cross-border inflow of funds in Asia in 2020 was $5.85 Billion, which they purchased in South Korean and Vietnam equities.

However, total outflows from the region were $35 billion, the highest since 2008. Graphic: Monthly foreign investment flows: Asian equities, https://fingfx.thomsonreuters.com/gfx/mkt/mopanwnxbva/Foreign%20investment%20flows-%20Asian%20equities.jpg

Senior investment strategist Suresh Tania stated that while FIIs shunned Asian market for the last few months, it was mainly due to an appreciation of the U.S.dollar and strong performing developed markets equities. Asian peers were grappling with COVID-19 wave and regulatory action.” Credit Suisse (SIX:).

Last year was a difficult year for investors, particularly in the tech sector. There were rising costs, disruptions in its supply chain and China’s sweeping crackdowns on internet companies and their tech.

South Korea and Taiwan which heavily rely on tech export revenue, witnessed outflows of 22.85 billion dollars and $16.25 million respectively last year.

Graphic: Breakdown by country for Asian equities’ foreign investment flows in 2021, https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoqolgvx/Breakdown%20by%20country%20for%20Asian%20equities’%20foreign%20investment%20flows%20in%202021.jpg Also, concerns in China’s real estate sector, with its largest builder China Evergrande Group struggling to repay its debt, also hit sentiment.

“In China, the real estate challenge will provide a headwind for growth for 2022, but we believe that the targeted easing should spur momentum, particularly with manufacturing upgrading and green investment becoming the bright spot,” said Jessica Tea, senior investment specialist at BNP Paribas asset management.

Last year’s MSCI Asia-Pacific index fell 3.4%, against the 16.8% gain.

While net flows to Indonesian and Indian equity stocks were positive last year, they saw outflows of $5.12 trillion in the fourth quarter.

Jun Rong Yeap (market strategist, IG) said that investors might not be willing to take on more risk in India because the country is more susceptible to COVID-19 threats, since only 43.6% have been fully vaccinated.

Tantia, Credit Suisse’s economist said that “Although many Asian economies have reopened well, it is too soon to anticipate continued FII flows in the short term.”

Asian equities do not look attractive due to flat-lined earnings revisions. This is despite the -1.3 standard deviation discount on global equities P/E basis. Omicron’s rise has created uncertainties in COVID-19. Graphic: Yearly foreign investment flows: Asian equities, https://fingfx.thomsonreuters.com/gfx/mkt/znvneleyopl/Yearly%20foreign%20investment%20flows-%20Asian%20equities.jpg