FIIs sell $21.8 bn shares in six emerging markets

Foreign institutional investors (FIIs) sold shares worth $21.8 billion in six emerging markets over the last one month, wiping out $581 billion in terms of market capitalisation.

The sale by FIIs in 17 trading days (since July 24 – the day on which the subprime mortgage defaults started taking their toll) accounts for 90.5 per cent of the net inflows of $24.146 billion from the start of 2007.

Of the $581 billion market cap wiped off from the six emerging markets, South Korea accounted for 220.54 billion, Taiwan $136.8 billion and India $115.27 billion. The Indonesian markets lost 41.95 billion, while the Philippines shed $22.18 billion in market cap.

Among the six emerging markets, the FIIs sold $9.09 billion shares in South Korea and $8.885 billion in Taiwan. These two markets account for 82.24 per cent or $17.981 billion of the total shares sold by FIIs in six emerging markets.

India, Indonesia and the Philippines have not seen large amounts of net foreign selling compared with South Korea and Taiwan. The FIIs sold $2.48 billion in India, $1.41 billion in Thailand and $4 million in the Philippines. Indonesia, however, witnessed a marginal inflow of $14 million.

The FIIs have been aggressive sellers in the South Korean markets since 2005, with outflows aggregating $12.140 billion in 2006 and $4.137 in 2005.

In the current calendar year, the FIIs sold shares worth $11.85 billion, of which $9.1 billion was sold since July 24.

The equities meltdown in emerging markets, led by the subprime crisis in the US markets, was followed by sell offs in the commodity markets too.

The sharp appreciation of the yen and the depreciation of the currencies of the emerging markets suggested some sell offs by hedge funds in the emerging markets.

According to Angel Broking research, the cycle of sell offs in equities, commodities and then currencies seems likely to be over. The markets may settle in the current zone, before taking off in emerging markets such as India.