Over $10 billion pulled from Asia as AI rally pauses

Outflows totaled $10.18 billion – the steepest decline since the start of the year – with selling concentrated in Taiwan, South Korea, India, Thailand, Indonesia, Vietnam, and the Philippines. By comparison, Asian markets saw net inflows of $2.28 billion in October.

South Korea recorded the largest outflow at about $5.05 billion, erasing all of the previous month’s inflows. Taiwan followed with $3.86 billion in withdrawals, while India saw $1.42 billion in outflows after a record October rally.

The trend was driven by widespread profit-taking amid growing concern that AI-related stocks had become overvalued. The MSCI Asia ex-Japan Information Technology Index fell 4.23% over the week after a six-month rally of 62.5%. The drop coincided with a 4.38% decline in the global MSCI technology index.

Volatility has been fueled by investor anxiety over inflated tech valuations, even as the sector’s fundamentals remain solid. The MSCI Asia Pacific ex-Japan index’s price-to-earnings ratio rose to 15.81 – its highest since mid-2021 – intensifying fears of an overheated market.

Some investors are rotating into emerging markets less dependent on the AI sector. India’s outflows were partly due to its underweight status in global portfolios, though the country may still attract future inflows as a hedge against AI-driven volatility, supported by interest in local manufacturing and IT exports.

Vietnam and Thailand were least affected, with outflows of $95 million and $40 million, respectively. In contrast, Indonesia and the Philippines saw modest inflows of $207 million and $77 million, signaling capital rotation within the region.

Overall, profit-taking and position adjustments after months of AI-driven gains reflect a natural cooling in overheated markets rather than the start of a prolonged downturn.