FIIs return to Asia ex-Japan, India still faces selling risk

markets

Foreign institutional investors have returned as buyers in Asia ex-Japan September so far, spurred by the US Fed’s cautious stance on risk management and expectations of two more rate cuts in 2025.

In the first three weeks of September, foreign funds pumped in $13 billion across the region, led by Taiwan and South Korea. Taiwan drew $8.14 billion while South Korea attracted $5.3 billion.

India, which saw heavy selling of over $4 billion in August, turned marginally positive with inflows of $246 million.

However, analysts caution that India remains vulnerable to fresh outflows given trade tensions with the US, trimmed earnings estimates and stretched valuations.

Malaysia saw a modest $122 million inflow, while Indonesia, after a strong $672 million buying streak in August, witnessed outflows of $443 million in September. The Philippines continued to remain under pressure, with $6 million in net selling despite attractive valuations.

Market watchers say India’s prospects hinge on domestic drivers. A cut in GST rates, the large repo rate reduction by the RBI in June and expectations of further easing could lift consumption and corporate earnings. Yet, FIIs are likely to wait for tangible signs of earnings recovery before turning decisively bullish.