China Funds Lose Most in Fifth Week of Asian Outflow

International money managers pulled a combined $1.2 billion from Asian funds this past week, a fifth straight week of outflows, according to Citigroup Inc. (C)

China funds posted the biggest losses with $558 million of net withdrawals in the week ended June 19, followed by regional funds at $521 million, Citigroup's Hong-Kong based chief Asian strategist Markus Rosgen wrote in a note to clients today. Foreigners net sold Asia by $3.6 billion in the week, with South Korea and Taiwan taking up the largest shares, he wrote.

The MSCI Asia Pacific Index slid 0.9 percent as of 11:59 a.m. in Hong Kong, adding to yesterday's 4.1 percent slump after Federal Reserve Chairman Ben S. Bernanke said the central bank may end bond purchases by the middle of next year if the U.S. economy improves in line with Fed projections.

The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, has fallen 25 percent from its Feb. 1 high, with a 20 percent decline considered the threshold for a bear market. A crackdown on illegal capital inflows, efforts to rein in shadow banking and a campaign to control home prices have contributed to increased borrowing costs and a slump in equity prices.

Inflows into Asia have slowed to $1.1 billion this year from the peak of $9.4 billion in March, Rosgen wrote. Foreigners bought a net $518 million of Japanese shares in the week, he said. Overall, bond funds saw $7.5 billion of outflows, while equity funds posted $4.8 billion of inflows, with most of that money going to North America, the report said.

ASEAN Stocks

Benchmark indexes in South Korea and Taiwan dropped at least 1.7 percent today. Thailand's SET Index (SET) slid 2.7 percent, poised for its lowest close since December. Foreign investors sold a net $1.35 billion of Thai shares in June through yesterday, the most for a month since August 2011, according to exchange data compiled by Bloomberg.

The Thai stocks measure has plunged 16 percent since May 22, when Bernanke said U.S. policy makers may scale back stimulus efforts if the employment outlook improves sufficiently. The Fed may reduce the $85 billion monthly bond purchases by $20 billion at the end of its September policy meeting, a Bloomberg survey of economists showed.

In Indonesia, overseas investors sold a net $128 million of stocks yesterday, their 20th day of selling, data compiled by Bloomberg show. The Jakarta Composite Index tumbled 3.2 percent today, heading for the lowest close since February 5. The gauge has lost 14 percent after reaching a record on May 20.