"Buy Asia" trading abruptly stopped! Global funds urgently rebalancing and withdrawing, creating the largest outflow in four years.

It has been noticed that due to the escalating actions of the United States and Israel towards Iran, causing a global reassessment of risks, overseas investors are withdrawing funds from Asian emerging stock markets at the fastest pace in nearly four years. Data shows that global funds sold a net $11 billion of stocks from Asian emerging countries excluding mainland China this week, expected to mark the largest outflow since March 2022. This includes a record $7.9 billion withdrawal from Taiwan, around $1.6 billion from South Korea, and approximately $1.3 billion from India. The outflow of funds has led to severe sell-offs in the region's stock markets, including record single-day drops in the South Korean Kospi index, and a series of trading halts in some markets. The MSCI Asia-Pacific index fell over 6% this week, on track to mark the largest weekly drop in nearly six years and one of the worst relative performances to the S&P 500 index since April. The collective withdrawal of foreign investment also signifies a reversal of one of the most profitable trades in recent months - "selling the U.S. and buying Asia." This strategy previously involved reallocating from overvalued U.S. stocks to Asian stocks, anticipating a weaker dollar, subdued inflation, and the demand for chip stocks in the region due to the AI boom. Gary Tan, a fund manager at Allspring Global Investments, stated: "Global funds had previously bought into Asian stocks based on expectations of a weaker dollar and subdued inflation, but the outbreak of the Iran situation has questioned both of these assumptions. Investors are now reassessing whether the strengthening of risk aversion sentiment will keep the dollar stronger for a longer period, and whether the rise in oil prices will reignite inflation pressures." Before the conflict in Iran erupted, Asian stocks had been performing strongly relative to U.S. stocks at the beginning of the year, with global investors increasingly shifting funds towards the region. The current sharp decline marks a reversal of this trend.