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J.P.Morgan: Equity Outflows Keeping Up The Pressure

ASIA FX

J.P.Morgan note that “outflows expected to continue. After a brief reprieve in May, foreigners withdrew from non-China equities to the tune of $20bn in June, the fastest monthly pace since the Covid shock of March 2020. June’s outflow was 2.5 standard deviations higher than its recent historical average (for perspective, it was 2.2 s.d. in the June 2013 taper tantrum). With our economists noting rising U.S./Western Europe recession risks, and our latest U.S. growth forecast for 2Q22 coming perilously close to a recession, we expect equity outflows to continue. We have noted previously that we find equity flows to be a notable driver of price action in Asia FX. INR, TWD, THB most vulnerable. We refresh our assessment of equity outflows, evaluating risks of outflows based on valuations, exposure to the IT sector, positioning, sensitivity to global macro conditions, and our in-house stance for each country. We find that INR, TWD, and THB are the most vulnerable to continued outflows. We retain our long USD/INR and USD/KRW (via 12-month NDFs) recommendations, partly on the back of our view of continued equity outflows.”

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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