Foreign investors offload Asian equities as Sino-US trade war flares

* Foreigners sell $4.5 bln so far in Aug
* Taiwan, India lead regional outflows
* Disappointing 2Q earnings add to worries

By Patturaja Murugaboopathy and Gaurav Dogra
Aug 7 (Reuters) - Foreign investors dumped Asian equities in
the first six days of August after two months of buying, as the
United States ramped up pressure on China with a $300 billion
trade barrage last week.
Overseas investors sold about $4.5 billion of regional
equities during the period, data from stock exchanges in South
Korea, Taiwan, India, Thailand, Philippines, Indonesia, and
Vietnam showed.
Sharp outflows from Asian markets point to increased worries
that trade tensions between the world's two top economies could
escalate, and regional economies and corporate earnings might
deteriorate further.
U.S. President Donald Trump said last Thursday he would slap
a 10% tariff on the remaining $300 billion of Chinese imports
starting Sept. 1, marking an end to a truce in the year-long
trade war that was struck in June. In response, China let its currency weaken 1.4% on Monday,
sending it past the key 7-per-dollar level for the first time in
more than a decade, and then the United States labelled Beijing
a currency manipulator.
MSCI Asia-ex-Japan index .MIAPJ0000PUS had fallen 6.4%
this month as of Tuesday's close, after shedding 1.7% in July.
"Recent foreign outflows from Asian equities clearly suggest
that investors are getting nervous on markets given escalating
trade tensions," said Chetan Seth, a strategist for Nomura
Securities in Singapore.
It might get harder for the United States and China to ease
or soften these tensions given how events have unfolded over the
last few days, he said.
Goldman Sachs said markets were pricing in a less than 15%
chance of a trade deal being agreed. It estimated 13% and 8%
cumulative earnings downside for MSCI China and MSCI
Asia-ex-Japan in 2019-2020 under a "no deal" scenario.
Taiwan and India saw the biggest outflows in Asia, with net
selling of $1.8 billion and $1.1 billion respectively. South
Korea also witnessed outflows, of $919 million.
Taiwan and South Korean companies are more exposed to the
Sino-U.S. trade tussle as they have extensive ties with tech
firms in China and are part of their supply chains.
Indian shares were undermined last month after the federal
budget raised import tariffs on many items, hiked taxes on the
rich and proposed changes in shareholding norms. A slew of disappointing earnings by Asian firms for the
second quarter also increased investor caution on regional
markets.
Refinitiv data showed major Asian firms such as Tata Motors
TAMO.NS , Canon Inc 7751.T and Nissan 7201.T have posted
second-quarter earnings below expectations.
"So far 1H earnings in Asia-ex-Japan markets have been below
estimates – although still early days. The question investors
need to answer is what happens to 2020 earnings as markets in 2H
will start discounting next year's earnings," said Nomura's
Seth.
"If trade tensions persist, there may be more downside to
current consensus earnings estimates."
In July, foreigners had invested $234 million in Asia, much
lesser than $4.2 billion inflows in June.

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