Foreign Institutional Investors (FII) or Foreign Portfolio Investors (FPI) are overseas entities that invest in a country's securities markets.
Why FII Flows Matter in Asia
Foreign investors hold significant portions of Asian market free float:
- India: FIIs own ~17% of NSE market cap
- South Korea: Foreigners own ~30% of KOSPI
- Taiwan: Foreign ownership ~40% of TWSE
- Japan: ~30% of TSE trading volume
Impact Pattern
When FIIs buy: local currency strengthens + stocks rise When FIIs sell: local currency weakens + stocks fall
Emerging markets (India, Indonesia) are more sensitive to FII flows than developed markets (Japan, Singapore).
What Drives FII Flows
- US interest rates (higher US rates → money leaves Asia)
- Dollar strength (strong dollar → FII outflows from Asia)
- Local economic growth
- Regulatory changes (tax on foreign investors)