EM Asia ex-China saw about US$17bn of foreign outflows in a single week, the second-largest on record
AI summary card
EM Asia ex-China saw about US$17bn of foreign outflows in a single week, the second-largest on record
Goldman Sachs tracking shows that Korea and Taiwan led this week's sharp foreign outflows from EM Asia ex-China, while local retail investors, especially in Korea, bought aggressively; MSCI May rebalancing may generate more than US$76bn in two-way passive flows across APAC.
- EM Asia ex-China saw about US$17bn of FII outflows this week, including US$13.2bn from Korea and US$2.5bn from Taiwan.
- EM ex-China has recently seen US$29bn of net foreign selling, reversing the US$19bn of net buying since the April lows.
- Local retail investors in Korea bought about US$14.1bn this week, offsetting foreign selling pressure; retail inflows into Asian markets year to date are about US$27bn.
- MSCI core index rebalancing in May is expected to trigger more than US$76bn of total two-way flows in APAC markets and about US$44bn in GEM markets.
Report interpretation
Overview
This report is Goldman Sachs' weekly tracking of emerging market, Asia Pacific, and global equity fund flows, with a focus on the sharp foreign outflows from EM Asia ex-China, local retail absorption, southbound flows, global equity mutual fund flows, and the potential passive impact of MSCI's May index rebalancing. The report date is May 15, 2026.
Core views
The core view is: first, EM Asia ex-China recorded about US$17bn of weekly foreign outflows, the second-largest weekly foreign selling on record, driven mainly by Korea and Taiwan; second, EM ex-China foreign investors have recently sold a net US$29bn, showing a reversal of buying momentum after the April lows; third, local retail money is partly taking the other side, especially in Korea where retail investors bought about US$14.1bn this week; fourth, MSCI's May rebalancing could deliver substantial passive inflows to Taiwan, Korea, South Africa, and Saudi Arabia, while Indonesia, India, China, Mexico, and Turkey may face larger passive outflows.
Analysis framework
The report uses a flow-monitoring framework, observing foreign institutional money, domestic institutional money, local retail investors, southbound flows, global equity fund flows, and MSCI passive rebalancing flows in separate layers, and combines data from EPFR, Bloomberg, Refinitiv, FactSet, MSCI, AMFI, and TEJ to estimate capital direction across markets, regions, and sectors.
Methodology notes
Layering foreign, local institutional, and retail flows
By separating FII, DII, local retail, and southbound flows, the framework helps determine whether market selling pressure is coming from overseas allocation money or from local investor behavior.
Passive flow estimation
Based on MSCI index changes, fund assets under management, and stock trading liquidity, the framework estimates the total two-way flow and net passive flow that may occur once rebalancing takes effect.
Global equity fund flow tracking
By tracking flows into global, developed market, emerging market, regional, and country funds, the framework captures changes in cross-regional asset allocation preferences.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- EM Asia ex-China equitiesCore coverage asset
- Strengths
- Still supported by local retail investors and some passive flows, and year-to-date fund flows remain positive in part.
- Weaknesses
- Weekly foreign outflows of about US$17bn indicate a short-term decline in overseas risk appetite.
- Comparison
- Compared with non-Asian emerging markets, foreign selling pressure is more concentrated in North Asia; non-Asian EMs sold off about US$620mn this week.
- Risks
- Continued foreign withdrawal, passive selling from index rebalancing, and declining market liquidity.
- Korea equitiesOne of the largest foreign outflow markets, while retail absorption is the strongest
- Strengths
- Local retail investors bought about US$14.1bn this week, and MSCI rebalancing is expected to bring sizeable passive inflows.
- Weaknesses
- Weekly FII outflows of about US$13.2bn leave the net change since February 27 still materially negative.
- Comparison
- Korea contributed the most to the foreign selling pressure in EM Asia ex-China.
- Risks
- Ongoing foreign exits, unsustainable retail absorption, and volatility in the won and the global tech cycle.
- Taiwan equitiesA market with both foreign outflows and passive inflows
- Strengths
- MSCI rebalancing is expected to bring sizeable passive inflows, and technology hardware and semiconductor industries may benefit.
- Weaknesses
- Weekly FII outflows were about US$2.5bn, while local retail investors sold about US$0.8bn this week.
- Comparison
- Foreign outflows are smaller than in Korea, but retail support is weaker than in Korea.
- Risks
- Semiconductor cycle volatility, continued foreign de-risking, and passive inflows coming in below expectations.
- China equitiesA potential passive outflow market in MSCI rebalancing
- Strengths
- Southbound flows still recorded weekly inflows, with southbound inflows at about US$37bn year to date.
- Weaknesses
- In MSCI EM rebalancing, China is expected to be one of the larger passive outflow markets.
- Comparison
- Unlike expected passive inflow markets such as Taiwan and Korea, China may face net outflows in the rebalancing process.
- Risks
- Passive outflows, weaker foreign risk appetite, and pressure on consumer and retail sectors.
- MSCI INCAn entity related to index data and rebalancing analysis
- Strengths
- MSCI index changes have a major influence on global passive capital allocation.
- Weaknesses
- This report is not fundamental research on MSCI INC shares and does not provide a rating or target price.
- Comparison
- In this report, MSCI mainly serves as the index provider and source of the rebalancing event rather than as an investment recommendation target.
- Risks
- Rebalancing estimates depend on fund AUM, free-float factors, and price data, so actual flows may differ from the estimates.
Key data
- EM Asia ex-China weekly FII outflowApproximately US$17bnThe second-largest weekly foreign outflow on record, driven mainly by Korea and Taiwan.
- Korea weekly FII outflow-US$13.2bnThe largest source of foreign outflows from EM Asia ex-China this week.
- Taiwan weekly FII outflow-US$2.5bnForeign selling pressure this week was second only to Korea.
- Korea weekly local retail buying+US$14.1bnLocal retail money significantly offset foreign selling pressure.
- Southbound flow weekly inflow+US$1.2bnSouthbound inflows are about US$37bn year to date.
- MSCI APAC core index rebalancing total two-way flowMore than US$76bnExpected to take effect after the May 29 close.
- MSCI GEM core index rebalancing total two-way flowAbout US$44bnNet passive flow is expected to be about -US$500mn.
- Global equity fund weekly inflow+US$21bnHigher than the roughly US$3bn inflow seen last week.
- GEM equity fund weekly outflow-US$2.6bnGEM funds still have about US$57bn of inflows year to date.
Impact & implications
In the near term, the rapid withdrawal of foreign capital from EM Asia ex-China is likely to intensify liquidity and valuation pressure in North Asian markets, especially Korea and Taiwan; however, the large-scale buying by Korean local retail investors shows that domestic capital absorption capacity is improving. MSCI rebalancing may amplify passive trading demand around the end of May, with Taiwan, Korea, South Africa, and Saudi Arabia likely to benefit relatively, while Indonesia, India, China, Mexico, and Turkey may face passive outflow pressure. By sector, technology hardware and semiconductors, as well as metals and mining, may attract larger passive inflows, while capital goods, consumer retail, and services may come under pressure.
Risks
- Foreign selling may continue and further weigh on EM Asia ex-China market performance.
- MSCI rebalancing estimates are based on price, fund size, and index-tracking assumptions, so actual passive flows may differ from estimates.
- Local retail absorption may not be sustainable, and if the market continues to fall, volatility could increase.
- Liquidity, stock-borrow constraints, and transaction costs may affect basket or rebalancing trade execution.
- Global fund risk appetite, exchange rates, and macro shocks could alter cross-regional capital allocation.
What to watch
- The actual trading and passive flows after the MSCI index rebalancing on May 29 close.
- Whether foreign selling in Korea and Taiwan slows, and whether Korean retail buying continues.
- Whether China, India, Indonesia, Mexico, and Turkey experience the expected passive outflow pressure.
- The direction of passive flows into technology hardware and semiconductors, metals and mining, capital goods, and consumer retail and services.
- Subsequent weekly changes in global equity funds, GEM funds, and southbound flows.