Foreign investors sold Asian equities for the ninth straight month in July, with net outflows totaling about $25.48 billion across South Korea, Taiwan, India, Indonesia, Thailand, Vietnam, and the Philippines [1]. Taiwan accounted for roughly $22.95 billion of the outflows, sharply up from about $8 billion in June, making it the largest single-market withdrawal in the region [1, 2, 3, 4]. South Korea saw net foreign outflows of approximately $6.26 billion, marking the third consecutive month of capital withdrawal [1, 2, 3, 4].

In contrast, India, Thailand, Indonesia, and the Philippines attracted inflows of $2.12 billion, $1.46 billion, $88 million, and $69 million respectively, partially offsetting losses from Taiwan and South Korea [1, 2, 3, 4]. Vietnam saw a marginal outflow of $12 million [1, 2, 3, 4].

Market concerns center on the sustainability of AI-related capital expenditure and memory chip demand. Massive selloffs hit tech-heavy equities in Taiwan and South Korea as investors questioned the durability of chip demand amid high AI spending needs [1, 2, 3, 4]. BNP Paribas analysts highlighted that "Alphabet and Tesla's negative cash flow announcements have raised doubts about AI spending sustainability and cash burn, aggravating negative market sentiment" [1]. Additionally, China's Moonshot introducing low-cost AI models heightened fears over the large capital expenditures needed by leading AI firms [1, 2, 3, 4].

South Korea's KOSPI index plunged 22% in July after strong gains earlier this year due to concerns over AI capital spending, leverage, and memory chip valuations [4]. HSBC strategist Herald van der Linde said, "The unusually high swings in AI-related sectors are making global investors diversify. We recently upgraded India to neutral within Asia" [1].

Despite large outflows, Taiwan and South Korea remain core to the global AI supply chain with ongoing underlying demand [3, 4]. Taiwan Semiconductor Manufacturing Company (TSMC) reported record monthly revenue of 467.58 billion TWD in July, a 5.6% increase from June and 44.7% year-on-year growth [2, 3, 4].

Taiwan's stock index rebounded strongly on August 10, climbing over 700 points to reclaim the 45,000 level, supported by TSMC's revenue strength and renewed buying interest [2, 3, 4]. However, analysts caution that resistance remains near 45,200 points with short-term risks from rising margin debt and upcoming U.S. CPI data, warning investors not to chase the rally hastily [2, 4]. One Taiwan investment director noted the technology shift has reshaped tech stock valuations, negatively affecting Taiwan's memory chip sector but highlighting packaging and optical groups as new market leaders [4].