APAC Equity Strategy:Foreigners continue to sell in May

　　Foreigners continue to sell in May. Figure 1 highlights net foreign selling of US$3.2 bn out of Emerging Asia ex-China ex-Malaysia so far in May. The foreign selling this month almost reverses the net foreign buying of US$3.6 bn in April. Significantly, about 90% of the net foreign selling or US$3bn continues to be in Taiwan. And as highlighted in our 9 May report Capitulation in Taiwan, foreigners are now net sellers of Taiwan to the tune of 0.4% of market cap versus a recent high of +0.4% on 31 March 2016. After Taiwan, Korea and Indonesia are associated with modest net foreign selling of around US$200 mn each.

　　All markets in capitulation mode. With foreigners turning net sellers of Taiwan in May and on a rolling 12 months basis, all markets are in capitulation mode with net foreign selling of 1.1% of market cap in Japan, 1% in Thailand, 0.8% in Korea, 0.7% in the Philippines, 0.6% in Malaysia, 0.5% in Indonesia, 0.4% in Taiwan, and 0.1% in India.

　　Sell in May We are more tempted to buy the dips particularly as MSCI Asia ex-Japan P/ B has now dropped to 1.27x. This is just 5% from the last three lows of 1.19x in the 2001 global recession, 1.22x during 2003 SARs episode, and 1.23x during the 2008-09 GFC. See Figure 2.