In May 2025, Asian equity markets experienced their most substantial monthly foreign investment inflow in over a year, signaling renewed investor confidence across the region. Foreign investors poured approximately $10.65 billion into equities across key Asian markets, including India, Taiwan, South Korea, Thailand, Indonesia, Vietnam, and the Philippines. This marked a significant reversal from four consecutive months of net selling, highlighting a shift in investor sentiment driven by easing trade tensions and burgeoning technological investments.
Taiwan emerged as the primary beneficiary, attracting $7.28 billion in foreign capital, the highest since November 2023. India followed with $2.34 billion, its most significant inflow since September 2024. These figures underscore the growing appeal of Asian markets amid global economic uncertainties.
The resurgence in foreign investment is attributed to several factors. A notable contributor is the 90-day pause on U.S. tariffs, which alleviated immediate trade concerns and provided a window of stability for investors. Additionally, the announcement of $600 billion in AI-related investments from Saudi Arabia to U.S. firms has had a ripple effect, boosting confidence in Asian markets, particularly in Taiwan and South Korea, known for their semiconductor industries.
Goldman Sachs has responded to these developments by raising its earnings growth forecasts for the MSCI Asia Pacific ex-Japan index to 9% for both 2025 and 2026. This optimistic outlook reflects the anticipated benefits of technological advancements and increased capital inflows in the region.
Despite the overall positive trend, not all markets shared equally in the gains. Thailand experienced net selling totaling $491 million, indicating that while regional sentiment is improving, individual market dynamics continue to influence investment decisions.
Year-to-date, the MSCI Asia-Pacific Index has gained 8.8%, outperforming both the MSCI World Index and the S&P 500 Index. This performance suggests a growing preference among investors for Asian equities, driven by favorable economic indicators and strategic investments in technology sectors.
The significant foreign inflows into Asian equities in May 2025 highlight a renewed investor confidence, spurred by easing trade tensions and substantial technological investments. While challenges remain, the region's strong performance and positive outlook suggest a promising trajectory for Asian markets in the near term.