Foreign Investors Favour US ETFs Over India, Citi Says

Foreign investors favour US exchange-traded funds over India and Taiwan despite significant inflows into both countries' ETFs, according to Citi Research analysis.

In the week ended June 5, equity funds globally saw a substantial influx of $10.7 billion, with the US and Global ETFs receiving the lion's share. Despite this, Taiwan and India's ETFs also experienced inflows, with $3 billion and $1.2 billion respectively pouring in amid their underperformance in the Asian market, Citi said in a research note.

However, foreign investors are displaying a clear preference for US ETFs over those of India and Taiwan. This preference is evident despite the significant inflows into the ETFs of both countries, according to the recent analysis.

The international research firm's note came as Indian equity benchmarks had just concluded a volatile week, ending at record highs. This surge came amid a notable deviation from the predictions of exit polls conducted prior to the Lok Sabha elections, catching many market participants off guard on the result day.

Citi's analysis indicates that the trend towards US-based investments reflects a broader confidence in the American market amid ongoing global uncertainties.

While Taiwan and India saw substantial inflows into their ETFs, the region witnessed widespread foreign selling, with $3.5 billion and $1 billion leaving Taiwan and India respectively during the same period. South Korea observed a foreign outflow of $0.7 billion.

China experienced an outflow of $1.1 billion via northbound connections, while Hong Kong saw a significant influx of $4.3 billion from China through southbound connections, indicating intricate cross-border investment dynamics within the region.