Portfolio outflows cloud SE Asia scene

Portfolio outflows cloud SE Asia scene

SINGAPORE (Reuters): Southeast Asian currencies, under the gun because of political jitters, are also being pressured by portfolio outflows, recent data shows.

Foreign fund managers' withdrawals from regional stocks so far this year have risen sharply over the year ago period.

Funds data from Nomura Asia showed Asia-dedicated U.S. mutual funds have sold a net $811 million of regional stocks between January and July 7 compared with net inflows of $293 million a year ago.

The data were not country specific, but analysts said these funds were mostly being relocated to North Asian markets -- Hong Kong, South Korea and Taiwan.

And in the near future, the outflows might not be limited to Southeast Asia; recent surveys indicate more fund managers are increasing their exposure in the U.S. and Europe while selling Asia-Pacific stocks.

The Nomura data were based on money being moved into or out of 164 open-ended retail mutual funds in the U.S.

They represent a 99 percent chunk of Asia-dedicated retail fund investment from the U.S. and are taken by the market as a proxy for investor interest in the region.

In increasingly divergent Asia, the figures are most likely to represent foreign net selling positions in Southeast Asian markets, according to fund managers in Singapore.

"People are still concerned about political uncertainties and the slow pace of reform in this part of the world," said Robert Penaloza, investment manager at Aberdeen Asset Management.

"Most likely, these funds are being relocated to North Asia where economic prospects are better," he said.

Foreigners have net selling positions of 28.01 billion baht ($70 million) in Thai stocks year-to-date, compared with 3.13 billion for all of 1999, Stock Exchange of Thailand data showed. In Indonesia, foreign investors had sold a net 400 billion rupiah ($42 million) of local stocks between January and April, according to official data.

The Philippine stock market is also facing foreign net selling, officials said, but no cumulative figures are available. Although these sales have not always translated into actual outflows immediately, they will over time, especially when sentiment toward the region is bearish, analysts said.

Going forward, this trend of outflows looks set to drag on, although the jury is still out on its magnitude.

A recent Merrill Lynch Gallup Survey for July showed fund managers had increased their exposure to U.S. equities and sold Pacific and Japanese equities.

The survey said emerging markets and the Pacific, where managers had been following the global economic growth prospect, were losing out as these managers were more confident the U.S., Europe and Britain would achieve a soft landing.