From Vietnam to Taiwan, foreign investors offload Asian equities

Foreign investors dumped Asian equities in the first six days of August after two months of buying. (Shutterstock)
Updated 07 August 2019

From Vietnam to Taiwan, foreign investors offload Asian equities

  • MSCI Asia-ex-Japan index has fallen 6.4 percent this month

BENGALURU: Foreign investors dumped Asian equities in the first six days of August after two months of buying, as the US 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.

US President Donald Trump said last Thursday he would slap a 10 percent 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 percent 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 labeled Beijing a currency manipulator.

MSCI Asia-ex-Japan index had fallen 6.4 percent this month as of Tuesday’s close, after shedding 1.7 percent 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 US 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 percent chance of a trade deal being agreed. It estimated 13 percent and 8 percent 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-US 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 , Canon Inc. and Nissan 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.


Gulf Marine CEO quits after review sparks profit warning

Updated 22 August 2019

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.