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.


Saudi energy giant to invest $3bn in Bangladesh’s power sector

Updated 22 October 2019

Saudi energy giant to invest $3bn in Bangladesh’s power sector

  • Experts say deal will usher in more economic and development opportunities for the country

DHAKA: Saudi Arabia’s energy giant, ACWA power, will set up an LNG-based 3,600 MW plant in Bangladesh after an agreement was signed in Dhaka on Thursday.

The MoU was signed by ACWA Chairman Mohammed Abunayyan and officials from the Bangladesh Power Development Board (BPDB), officials told Arab News on Monday.

According to the agreement, ACWA will invest $3 billion in Bangladesh’s energy development sector, of which $2.5 billion will be used to build the power plant while the rest will be spent on an LNG terminal to facilitate fuel supply to the plant. Under the deal, ACWA will also set up a 2 MW solar power plant.

In recent months, both countries have engaged in a series of discussions for investment opportunities in Bangladesh’s industry and energy sectors. 

During the Saudi-Bangladesh investment cooperation meeting in March this year, Dhaka proposed a $35 billion investment plan to a high-powered Saudi delegation led by Majed bin Abdullah Al-Qasabi, the Saudi commerce and investment minister, and Mohammed bin Mezyed Al-Tuwaijri, the Saudi economy and planning minister.

However, officials in Dhaka said that this was the first investment deal to be signed between the two countries.

“We have just inked the MoU for building the LNG-based power plant. Now, ACWA will conduct a feasibility study regarding the location of the plant, which is expected to be completed in the next six months,” Khaled Mahmood, chairman of BPDB, told Arab News.

He added that there are several locations in Moheshkhali, Chottogram and the Mongla port area for the proposed power plant.

“We need to find a suitable location where the drift of the river will be suitable for establishing the LNG plant and we need to also consider the suitability of establishing the transmission lines,” Mahmood said.

“It will be either a JV (Joint Venture) or an IPP (Independent Power Producer) mode of investment, which is yet to be determined. But, we are expecting that in next year the investment will start coming here,” Mahmood said.

BPDB expects to complete the set-up process of the power plant within 36 to 42 months.

“We are in close contact with ACWA and focusing on the successful completion of the project within the shortest possible time,” he said.

Abunayyan said that he was optimistic about the new investment deal.

“Bangladesh has been a model for the Muslim world in economic progress. This is our beginning, and our journey and our relationship will last for a long time,” Abunayyan told a gathering after the MoU signing ceremony.

Economists and experts in Bangladesh also welcomed the ACWA investment in the energy development sector.

“This sort of huge and long-term capital investment will create a lot of employment opportunities. On the other hand, it will facilitate other trade negotiations with the Middle Eastern countries, too,” Dr. Nazneen Ahmed, senior research fellow at the Bangladesh Institute of Development Studies (BIDS), told Arab News.

She added that Bangladesh needs to weigh the pros and cons before finalizing such contracts so that the country can earn the “maximum benefits” from the investment.

“It will also expedite other big investments in Bangladesh from different countries,” she said.

Another energy economist, Dr. Asadujjaman, said that Bangladesh needs to exercise caution while conducting the feasibility study for such a huge investment.

“We need to address the environmental aspects, opportunity costs and other economic perspectives while working with this type of big investment. Considering the present situation, the country also needs to focus on producing more solar energy,” Dr. Asadujjaman told Arab News.