Concerns regarding the sustainability of artificial intelligence (AI) investments accelerated foreign selling in Asian stock markets. In July, there was a net outflow of $25.48 billion from seven Asian markets.
Net outflows from Asian stocks in July marked the ninth consecutive month of outflows. High financing needs for AI investments and concerns regarding companies' cash flows have pressured major technology companies in the region.
Taiwan experienced a net outflow of $22.95 billion from its stock market in July. This follows approximately $8 billion in sales in June. Taiwan's stock market is directly affected by changes in expectations regarding AI investments due to its weight in global semiconductor production.
Foreign capital outflow from the South Korean stock market reached $6.26 billion in July. Foreign investor sales in South Korea have occurred for three consecutive months.
Shift in investment focus
Investors have begun to question the cost of AI investments following negative cash flows reported by Alphabet and Tesla. The development of low-cost AI models in China is increasing questions regarding the future of the current growth model based on expensive infrastructure investments.
Despite the broader outflows, some markets attracted capital. India attracted $2.12 billion in foreign investment in July. Thailand saw an inflow of $1.46 billion in July.
Indonesia recorded a net inflow of $88 million in July. The Philippines recorded a net inflow of $69 million in July. Vietnam saw an outflow of $12 million in July.
Foreign investors are reducing risks in technology-heavy markets and shifting to different countries in Asia rather than completely withdrawing from the region.
