Foreign investors were net purchasers of Asian equities for the first time in six months in July, helped by strong earnings growth and efforts by the United States and Europe to resolve differences over trade, though worries heightened this week of a trade war between the United States and China.
Overseas investors bought a net $293 million of Asian stocks last month, after selling about $29 billion between February and June, data from seven stock exchanges showed.
The large part of buying took place in the latter part of the month, when prospects of a trade war between the United States and Europe receded.
"After the storm of redemptions", real longer term investors are looking up at valuations and assessing beaten down companies and selectively invest in them, said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
He added that a pause in the dollar rally also helped the inflows into the region.
The dollar index, which tracks the greenback against a basket of six major currrencies, fell 0.15 percent in July, its first monthly decline in four months.
In July, Indian and Taiwan equity markets saw the highest net inflow of $330 million and $277 million respectively, while Thailand and Vietnam markets witnessed some outflows.
"With uncertainty about the global business cycle and concerns about global trade, investor interest has been rising in India as an uncorrelated source of growth and a market less dependent on global portfolio flows," analysts in J.P. Morgan said in report on Friday.
The MSCI Asia-ex-Japan index rose 0.67 percent in the last month, marking its first monthly gain since April, boosted by strong second-quarter earnings by regional firms.
Thomson Reuters data showed that 54.7 percent of Asian companies have exceeded or met the consensus analysts forecast for the second quarter earnings so far.
However, the latest escalation in Sino-U.S. trade war has rattled regional markets this week, as U.S. administration proposed a higher 25 percent tariff on $200 billion worth of Chinese imports on Thursday.
"The ultimate resolution of the trade hostilities between the US and China, when it comes, will be a boon for the region," said AxiTrader's McKenna.
"More aggression and rhetoric for investors to process and an escalation (of trade tensions) would be negative for the region and positive for the dollar."