Money surging into Asia has equities in India and South Korea at record highs and the region's currencies on the cusp of their best ever quarter, signalling a shift in capital flows that investors say is set to lift Asian asset prices even higher.
At $17.5 billion, foreign buying of Asian stocks was the heaviest in a dozen years last month and the wall of cash that streamed into regional bond markets totalled $15.2 billion.
Money managers expect the rising tide has a long way to run as investors rush back into the region, attracted by low valuations, high yields in some markets and signs that most economies are rebounding.
Net equity outflows still amount to $34.1 billion so far in 2020 after pandemic-induced selling early in the year, and net bond inflows outside China are only $1 billion, suggesting plenty of dry powder can be put to work.
"It won't happen in a clear smooth line and there will be volatility," said Nader Naeimi, head of dynamic markets at AMP Capital.
"But some fast money seems to be getting interested again," he added, referring in particular to flows into Thailand, where foreigners bought $1.1 billion in equities in November and the stock market had its best month in 17 years.
India and South Korea have been other favoured destinations, and benchmark indexes there have scaled record peaks, lifting the S&P BSE Sensex by 78% and the Kospi by 91% from March lows.
"We see an opportunity to rotate away from China," said Andrew Gillan, head of Asia ex-Japan equities at Janus Henderson Investors in Singapore, who is bullish on Seoul-listed chip makers and banks in less-loved markets in Southeast Asia.
"We like China, but from an asset allocation perspective, it is less likely that China will outperform in the next 12 months simply because, in the 20 years I've been investing, this is the strongest five years for China relative to the region."
Prashant Bhayani, Asia chief investment officer at BNP Paribas Wealth Management, said Singapore and Indonesia are attractive thanks to exposure to cyclical and value stocks.
Equity and bond flows have also driven large shifts in currency markets, sending Asian currencies to multi-year highs, illustrating the depth of money moving into the region.
MSCI's Asia ex-Japan currency index is up a record 4% this quarter at all-time high and it is on track for an annual gain of 6% - double the rise in the emerging markets' currency index.
To be sure, the hardest hit markets remain below pre-pandemic levels, and others feel overdue for a pullback, with recent gains extremely vulnerable to outright reversal, as March's experience made clear.
"There's no such thing as sticky money for Indonesia, let's be clear about that," said SooChong Lim, head of Asia corporate research, at J.P. Morgan in Hong Kong.
"(But) this fund flow is very different...now the global tap is flowing and Indonesia stacks up quite well," he said. "For Indonesia, the best barometer on the sentiment is the rupiah."
The currency is up more than 5% since October and is near a five-month high as investors have dived in to the bond market, driving 10-year sovereign debt yields down by some 70 basis points but still well above 6%.