EM Asia ex-China records third consecutive week of foreign buying, led by Taiwan in returning inflows
AI summary card
EM Asia ex-China records third consecutive week of foreign buying, led by Taiwan in returning inflows
Goldman Sachs' weekly flow monitor shows net foreign inflows of US$2.9bn into EM Asia ex-China, with Taiwan alone seeing US$4.1bn of inflows for the week, while global equity fund inflows expanded to US$26bn; focus now turns to the Q2 index rebalancing by MSCI, FTSE, and S&P/ASX.
- EM Asia ex-China recorded net foreign inflows of US$2.9bn for the week, driven mainly by Taiwan at +US$4.1bn; South Korea at -US$0.9bn and ASEAN at -US$0.3bn remained net sellers.
- Since the February peak, EM ex-China has seen cumulative foreign outflows of US$79bn, of which US$19bn has recently been recouped, recovering about 24%; Taiwan has shown the clearest reversal among the major outflow markets, having regained more than half of its outflows.
- Southbound flows recorded net inflows of US$2.1bn for the week, bringing year-to-date inflows to about +US$33bn; retail inflows into Asian markets are about US$24bn year to date.
- Global equity funds saw weekly inflows of US$26bn, up from US$11bn the previous week; U.S. funds took in US$18bn, while Europe and Japan saw outflows of US$1.1bn and US$0.8bn, respectively.
- The Q2 2026 index rebalancing cycle has begun, with the MSCI announcement due within three weeks, and FTSE and S&P/ASX results expected in the first week of June.
Report interpretation
Overview
This report is Goldman Sachs' weekly EM flow monitor, focusing on foreign flows, southbound/northbound flows, global equity funds, retail flows, and major index rebalancing events in Asia. The report notes that EM Asia ex-China recorded a third consecutive week of net foreign buying, with Taiwan being the main source of returning inflows this week; meanwhile, global equity fund inflows accelerated, but AEJ, South Korea, India, and parts of non-Asian emerging markets still face flow pressure.
Core views
First, foreign investor risk appetite toward EM Asia ex-China is recovering, with net inflows of US$2.9bn this week, of which Taiwan's +US$4.1bn was the largest contributor. Second, in terms of flow retracement since the start of the conflict, EM ex-China has recovered US$19bn from the trough, equivalent to about one quarter of the previous US$79bn of outflows, although flows to South Korea and India remain weak. Third, at the global equity fund level, inflows into the U.S. and GEM are supporting overall demand for risk assets, while Europe, Japan, AEJ, and China-related funds continue to see outflows. Fourth, Q2 index rebalancing could have a significant flow impact on passive money, long-only investors, hedge funds, and retail trading.
Analysis framework
The report uses weekly flow data, EPFR fund flows, exchange connectivity flows, retail investor flows, historical performance around index constituent changes, and Goldman Sachs regional risk barometers for cross-tracking, with a focus on the potential flow impact of different regions, investor types, and index events on equity markets.
Methodology notes
Foreign institutional investor flows
Changes in overseas investor risk appetite across markets are measured through net foreign buying/selling, making this suitable for observing short-term cross-border flow pressure and the pace of inflow recovery.
Global and regional equity fund subscriptions and redemptions
Fund flows across global, GEM, AEJ, China, U.S., Europe, Japan, and other markets are used to distinguish changes in market allocation by active and passive capital.
Flow impact of index rebalancing
Using review and effective dates for indices such as MSCI, FTSE, and S&P/ASX, the analysis assesses passive and active trading that may be triggered by additions and deletions of constituent stocks.
Regional risk and retail sentiment tracking
Goldman Sachs regional equity risk barometers and retail sentiment indicators are used to help judge market crowding, flow momentum, and potential reversal risks.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Taiwan equity marketCore market for foreign flow recovery this week
- Strengths
- Net foreign inflows reached US$4.1bn for the week, and more than half of the previous foreign outflows have already been recouped.
- Weaknesses
- Retail flows were still net sellers of US$3.5bn this week, indicating divergence between local capital and foreign investors.
- Comparison
- Compared with South Korea and India, Taiwan's foreign flow reversal is more evident.
- Risks
- If global tech risk appetite weakens or index rebalancing turns unfavorable, the pace of flow recovery may slow.
- South Korea equity marketStill under foreign selling pressure but supported by some retail buying
- Strengths
- Retail bought about US$0.5bn this week, providing some support from local capital.
- Weaknesses
- Net foreign selling was US$0.9bn this week, and cumulative foreign selling since February 27 is about US$22bn.
- Comparison
- Compared with Taiwan, South Korea's foreign flow recovery is clearly weaker.
- Risks
- Continued foreign outflows may weigh on the sustainability of any market rebound.
- India equity marketOne of the Asian markets with relatively large foreign outflows
- Strengths
- Domestic buying appears to provide relatively strong support in some charts, with Indian DII net changes around the conflict period being substantial.
- Weaknesses
- Cumulative foreign selling since February 27 is about US$17bn.
- Comparison
- Compared with Taiwan, India's foreign flow recovery is weaker.
- Risks
- Valuation, foreign positioning, and changes in global interest rates may continue to affect flows.
- Hong Kong stocks linked to southbound flowsAn important channel for mainland Chinese capital allocation into Hong Kong stocks
- Strengths
- Net inflows of US$2.1bn for the week, bringing year-to-date inflows to about +US$33bn.
- Weaknesses
- Flows may be concentrated in a small number of highly liquid or high-attention names.
- Comparison
- Southbound flows have been relatively stable within Asia's regional flow structure.
- Risks
- If risk appetite for Hong Kong stocks or RMB liquidity changes, the strength of southbound inflows may fluctuate.
- Global equity fundsA fund pool measuring global risk appetite
- Strengths
- Net inflows reached US$26bn this week, with notable contributions from the U.S. and GEM.
- Weaknesses
- Europe, Japan, AEJ, and China-related funds still recorded outflows.
- Comparison
- Total inflows this week were significantly higher than last week's US$11bn.
- Risks
- If flows into developed markets weaken or China-related outflows continue, the quality of global inflows may deteriorate.
Key data
- Weekly foreign flows into EM Asia ex-China+US$2.9bnDriven by Taiwan at +US$4.1bn, while South Korea at -US$0.9bn and ASEAN at -US$0.3bn were net sellers.
- Weekly foreign flows into Non-Asia EM-US$90mnThe UAE at -US$60mn was the main drag.
- Weekly southbound inflows+US$2.1bnAbout +US$33bn year to date.
- Year-to-date retail inflows into Asia+US$24bnThis week, Taiwan retail sold -US$3.5bn, while South Korea retail bought +US$0.5bn.
- Weekly global equity fund inflows+US$26bnVersus +US$11bn last week; U.S. funds +US$18bn, Europe -US$1.1bn, Japan -US$0.8bn.
- Weekly GEM fund inflows+US$2.1bnAbout +US$60bn year to date.
- Recent foreign flow recovery in EM ex-China+US$19bnRecovering about 24% of the US$79bn outflows since the February peak.
- Major foreign-selling marketsSouth Korea -US$22bn, India -US$17bn, Taiwan -US$14bnThe period covers since February 27; Taiwan has already shown a more pronounced reversal in flows.
Impact & implications
Flow signals are modestly positive for Asian equities in the short term, especially for Taiwan and some technology hardware and semiconductor-related sectors; however, the return of capital is still only a partial recovery from previous large outflows rather than a full restoration of risk appetite. The index rebalancing window may amplify passive trading at the constituent-stock level, affecting additions/deletions, heavyweight index components, and heavily traded northbound/southbound names.
Risks
- The return of foreign capital is still only a partial recovery from previous large outflows and should not be interpreted as a full trend reversal.
- South Korea, India, AEJ, and China-related funds are still seeing outflows, and regional divergence may continue to widen.
- Index rebalancing may lead to short-term trading crowding and passive flow shocks, with amplified volatility in added/deleted names.
- When retail flows move in a different direction from foreign flows, market signals may become more complex.
- Some data in the report come from weekly flow figures and chart disclosures, which carry high short-term noise and need to be validated with subsequent weekly data.
What to watch
- Whether foreign inflows into Taiwan continue over the coming weeks and whether they spread to South Korea, India, and ASEAN.
- The performance of newly added/deleted constituent stocks around MSCI announcements, FTSE and S&P/ASX review results, and their effective dates.
- Whether active and passive flows into GEM and AEJ funds continue to diverge.
- Whether southbound flows maintain weekly net inflows and whether buying remains concentrated in a small number of Hong Kong blue chips.
- The relative changes among U.S., GEM, Europe, Japan, and China-related funds within global equity fund inflows.