Asian stock markets have experienced a significant increase in foreign investment in May, marking a sharp contrast to the outflows seen in the first four months of 2025. Optimism about progress in trade talks between the U.S. and China has eased fears that U.S. tariffs would worsen the global economic slowdown, encouraging foreign investment.
$6.22 Billion in Foreign Investment in Asian Stocks
As of May 12, foreign investors have poured approximately $6.22 billion into stocks in key Asian markets such as India, Taiwan, South Korea, Thailand, Indonesia, Vietnam, and the Philippines, according to data from the London Stock Exchange. This surge follows a period of substantial outflows earlier in the year.
Taiwan has been the leading beneficiary, attracting $4.43 billion in net foreign inflows. This marks a notable turnaround, ending four months of consecutive outflows. Meanwhile, Indian stocks also saw a major inflow, with $1.68 billion in foreign capital pouring into the market.
Strong Rebound After First-Quarter Outflows
In stark contrast to the positive developments in May, regional stocks had faced an enormous $54.33 billion in foreign outflows during the first four months of 2025—the highest outflow for this period since 2010. These outflows were largely driven by concerns over U.S. President Donald Trump’s trade policies.
The sharp recovery in May followed a period of market turbulence earlier this year. Since April 7, the MSCI Asia Pacific Index has surged 18%, fueled by the 90-day suspension of U.S. tariffs and promising developments in the trade talks between the U.S. and China.
Trade Deal Eases Tariff Concerns
In a bid to reduce tensions, the U.S. and China agreed to temporarily lower reciprocal tariffs, bringing the U.S. tariff on Chinese imports down from 145% to 30%. In return, China reduced its tariffs from 125% to 10% for a 90-day period. This move has alleviated concerns about a prolonged trade war and its potential impact on global growth.
Caution Amid Optimism
Despite the positive momentum, analysts remain cautious. Some experts warn that uncertainty persists, as the future of the trade deal remains unclear. While the tariff reductions are currently in place, it is uncertain whether they will be permanent or extended.
Goldman Sachs highlighted in a recent report that the news surrounding the trade deal has helped ease market stress. The report also noted that the weakening U.S. dollar and early signs of increased risk appetite among investors are contributing to the market’s positive outlook. However, the report also cautioned that weak corporate earnings growth and high valuations could lead to a market correction in the near term.
In conclusion, while optimism about trade talks has injected new confidence into Asian markets, the future remains uncertain, and investors must remain alert to potential risks.
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