Foreigners pull record US$5 billion as Southeast Asia stocks sink

[SINGAPORE] Foreign investors are selling Southeast Asian stocks at the fastest pace on record as the region's economic outlook worsens and the US gets closer to raising interest rates.

Overseas funds unloaded a net US$5.1 billion of Indonesian, Thai and Philippine shares in the third quarter as the MSCI Southeast Asia sank 21 per cent. The combined outflows are poised to be the largest since Bloomberg began collecting the data in 1999.

Record-low US borrowing costs fueled gains of more than 200 per cent in the three nations' benchmark equity gauges in the six years through 2014, as investors seeking riskier assets poured US$16.3 billion into stocks. The deepening slowdown in China's economy, the largest in Asia, is roiling emerging markets and spurring a commodity rout.

"These three markets will see more outflows," said Win Udomrachtavanich, Bangkok-based chief executive officer at One Asset Management Ltd, which oversees about US$3.5 billion of assets. "Their economies are being hurt by the global economic slowdown and commodity-price slump. Weaker currencies have also encouraged most investors to withdraw money." The Indonesia rupiah has fallen to 17-year lows, limiting scope for the central bank to cut interest rates amid the slowest economic expansion since 2009. Most Thai economic indicators have weakened this year as exports shrink and the military government struggles to spur local demand. The Asian Development Bank this month cut its 2015 growth forecast for the Philippines, where net foreign direct investment slid 40 per cent in the first six months of the year.

Federal Reserve Chair Janet Yellen reiterated last week the central bank's stance that higher interest rates are likely appropriate later this year. There's a 41 per cent probability the Fed will raise rates by its December meeting, according to futures data compiled by Bloomberg.

Foreigners have withdrawn a net US$1.2 billion from Indonesia shares this quarter, the biggest selloff in two years. The Jakarta Composite Index has dropped 15 per cent in the period, poised for the biggest loss since 2008, while the rupiah has tumbled 9.2 per cent.

Outflows from Thai stocks have reached US$2.6 billion, as the SET Index dropped 10 per cent and the baht sank 7.3 per cent. The Bank of Thailand on Friday cut its 2015 economic growth forecast to 2.7 per cent as exports and domestic consumption weaken.

In the Philippines, international investors have pulled US$1.3 billion from shares, heading for a quarterly record. The benchmark Philippine Stock Exchange Index is poised for a sixth straight monthly drop in September, the longest losing streak in 13 years, while the peso has declined 3.9 per cent.

BLOOMBERG