If you’re a retail investor, odds are you’ve probably tried to play it cool and “do your own research,” but when all else fails, most of us turn to see what the big dogs (Morgan Stanley, Berkshire Hathaway, BlackRock) do first.

Because when they start dumping stocks like Bear Stearns just went belly up… maybe it’s time to put down your copy of The Intelligent Investor and just follow the money. And when they start pulling billions out of a region, it’s probably worth asking: what the hell do they know that we don’t?

Case in point: foreign investors just yanked $43.7 billion out of Asian equities in Q1… the largest quarterly outflow since at least 2010, and likely the worst in 15+ years.

To put that in perspective… that’s more than double the $20 billion they pulled during the 2020 COVID panic. And it’s not just one or two countries getting slapped around… India, Taiwan, South Korea, Thailand, Indonesia, Vietnam, and the Philippines all took a hit.

The worst by far was Taiwan, which saw $14.13 billion in outflows in March alone. That’s the biggest monthly exit since January 2008 (aka the start of the global financial crisis). South Korea wasn’t far behind, marking its eighth straight month of net foreign outflows, with another $1.46 billion leaving the party.

And while India “only” lost $401 million in March, that was its lowest monthly figure in three months. So yeah, not exactly good news. So what’s causing all the Wall Street sharks to overreact so much… I mean this time around we don’t have a colossal real estate crash or worldwide pandemic… I’m afraid you already know the answer.

Yesterday, Donald Trump announced a sweeping round of reciprocal tariffs on U.S. trading partners. And China was the biggest target of course.

Tariffs on Chinese imports will now rise to a total of 54%, up from 20%, which gets dangerously close to the 60% level Trump promised during his 2016 campaign. As Ray Sharma-Ong at Aberdeen Investments put it, “Asia bears the brunt of these tariffs.” And investors are reacting accordingly… by heading for the exits.

Oh and just to prove that hedge funds aren’t just tweaking their portfolios, get this… According to a Morgan Stanley report, funds cut down net leverage across Asia by six percentage points in one week, down to 61%. If I had to guess, probably because their Q1 performance was a joke. Asia-focused hedge funds lost 60 to 70 basis points last week alone, dragging their monthly returns into negative territory (-0.37%).

Funds pulled out of China consumer stocks, dumped Taiwan tech, and started shorting Japanese equities ahead of Japan lifting its five-year ban on short selling. (They must think they know what’s coming). 

Ironically, while Wall Street is backing away from Asia, China is firing back… with red tape.

Beijing quietly told its planning agencies to freeze outbound investments into the U.S. (aka “no shopping in America until further notice”). Companies hoping to scoop up American assets are now being told to sit tight and rethink their vacation plans.

In 2023, Chinese outbound investment to the U.S. was already down 5.2%... even as global investment grew 8.7% (read: they’re sending money everywhere else but here). U.S. exposure now makes up just 2.8% of China’s total foreign investment (and that number’s looking like it’s about to ghost us completely).

So… who’s the real loser in this passive-aggressive economic divorce? Well, if you bought a Chinese tech stock because of a Jim Cramer thumbs-up (and maybe a “vibes are strong” Reddit post), then yeah… you might be. But more broadly, everyone caught in the middle of this geopolitical slap fight is losing… especially if you were hoping for market stability anytime soon.

This is far deeper than tariffs now. It’s about capital flows and Wall Street deciding Asia just isn’t worth the risk right now.

The smart money has already made its move. It’s parking itself in the usual panic shelters… U.S. Treasuries, gold, and the yen, aka the financial world’s equivalent of hiding under the bed during a thunderstorm.

As for what you can do… first, don’t lose your mind. Second, track what the big dogs are doing… we literally built our Wall Street Sentiment for that reason (you can check it out by going here). It shows what hedge funds and institutions are buying and selling on every tradable stock. Seriously, you should check it out. Because when the whales start swimming for safer waters… it’s probably not the time to skinny dip in emerging markets.

Stock.News does not have positions in companies mentioned.