Foreign investors pulled out money from Indian and other Asian markets: OECD

New Delhi, June 23: Foreign investors pulled out money from several Asian equity markets, including India, Japan, China and South Korea following US tariff announcements in April last year and renewed geopolitical tensions in the Middle East during early 2026, according to the Organisation for Economic Cooperation and Development (OECD).

Headquartered in Paris, OECD is an international, intergovernmental organization of 38 democracies with market-based economies.

In its latest Asia Capital Markets Report 2026, OECD said the renewed tariff disputes, rising geopolitical risks linked to the Middle East conflict and higher borrowing costs created a challenging backdrop for Asian economies during 2025 and the first half of 2026.

Nevertheless, regional capital markets continued to provide critical financing to businesses and governments across Asia.

OECD said equity and bond markets in Asia experienced significant volatility and Asian sovereign bond issuance reached a record USD 4.1 trillion in 2025, taking the region’s outstanding sovereign marketable debt stock to approximately USD 18.3 trillion.

Strong domestic investor participation, longer debt maturities and reliance on local currency financing helped many economies withstand external shocks.

While overall corporate investment remained broadly unchanged from 2024 levels, 44 per cent of listed companies in Asia reduced investment by more than 10 per cent, with smaller firms experiencing the sharpest declines.

The report also said that Asian capital markets demonstrated remarkable resilience in 2025 despite escalating trade tensions, geopolitical uncertainty and tighter global financial conditions, raising approximately USD 3.3 trillion, equivalent to 39 per cent of global capital raised.

Asia accounted for around 31 per cent of global GDP,  29 per cent of global public equity market capitalisation, 56 per cent of listed companies worldwide and 52 per cent of global venture capital activity in 2025, underscoring its growing importance in the global financial system.

Shift Towards Bonds and SEOs

Corporate fundraising patterns also shifted.

Initial public offering (IPO) activity weakened, falling 11 per cent compared with the 2022–2024 average, while secondary equity offerings surged 55 per cent. Asian companies increasingly turned to corporate bond markets to secure funding amid volatile market conditions.

The report also flagged persistent valuation challenges. Nearly 40 per cent of listed Asian companies trade below book value, reducing their appeal to global investors despite the region’s strong economic growth and globally competitive businesses. Several Asian markets have responded by introducing “value-up” initiatives aimed at improving shareholder returns, capital efficiency and corporate governance.

Need for Stronger Institutional Participation
Institutional investors continue to play a relatively limited role in Asian equity markets, accounting for just 21 per cent of market capitalisation, compared with a global average of 47 per cent.

The OECD said strengthening domestic institutional investor participation would be critical to deepening capital markets and improving long-term market stability.

The report further noted that human capital disclosures are becoming increasingly important for investors assessing long-term corporate performance.

Companies representing around 80 per cent of Asia’s market capitalisation disclosed human capital information in 2024, although a lack of standardised reporting frameworks continues to limit comparability.

Crypto Growth Brings New Regulatory Challenges
Meanwhile, Asia emerged as a global hotspot for digital assets, recording the fastest regional growth in crypto-asset transactions.

Blockchain-based crypto transactions in the region rose 69 per cent year-on-year in 2025, prompting calls for stronger consumer protection measures, cyber-security safeguards and regulatory co-operation among governments.

The OECD concluded that deeper and more diversified capital markets, stronger domestic investor bases, improved governance standards and enhanced regional co-operation will be essential to strengthening Asia’s resilience against future economic and geopolitical shocks. (BVI)