Asia Equity Strategy - Foreign investor capitulation - more signs - Credit Suisse

■ Net foreign selling reaches US$7.4 bn. With net foreign selling of US$1.7 bn on 10 February and a further US$1.6 bn on 11 February, net foreign selling in Emerging Asia ex. China has now reached US$4.6 bn in February. If we add the net foreign selling out of China (using the weekly EPFR data), aggregate net foreign selling in Emerging Asia has already reached US$7.4 bn.

■ Average net foreign selling in Emerging Asia in non-recession corrections is US$8.8 bn. Given the high degree of investor concern about outflows from GEM, we note that the net foreign selling of US$7.4 bn we have seen so far is not much below the average of US$8.8 bn seen in previous non-recession corrections (admittedly our EPFR data for China only goes back to 2008).

■ Foreign investors starting to nibble in Indonesia, Thailand and Korea. Foreign investors are now net sellers of all markets YTD in 2011 except for Taiwan. Interestingly, foreign investors are starting to nibble in Indonesia and Thailand. In Indonesia, we saw net foreign buying of US$195 mn yesterday – and it was the third day of net foreign buying in the last five days. In Thailand, we saw net foreign buying of US$66 mn yesterday – the first day of net foreign buying after five consecutive days of net foreign selling. In Korea, we saw net foreign buying of US$33 mn yesterday, the first day of net foreign buying after four consecutive days of net selling.