A total of US$20 billion flowed out of Asian markets in August and September, with Taiwan and South Korea accounting for 73 per cent of the total, the mutual fund tracker EFPR said. But the outflow stopped in the last week of last month, largely because of a rebound in fund flows into Taiwan and Korea. In the week to November 9, Asia funds, excluding Japan, had net new cash of US$967 million, a 20-week high. Chinese equity funds had net inflows of US$544 million, their best performance since last year. Despite signs that flows may be starting to reverse, however, Asian markets are still drained of liquidity, a report by HSBC said. The average cash level of Asia funds, excluding Japan, reached 2.1 per cent early this month, up from an average of 1.6 per cent for the past 12 months, in a sign that funds are cashing out. But this was still a big discount from 2008-09 when cash levels rose as high as 4.3 per cent. The Hong Kong stock exchange recorded a daily turnover of HK$54.2 billion yesterday and HK$52.5 billion on Friday, both down more than 25 per cent from the HK$74.6 billion recorded on Thursday. Mark Matthews, the head of research in Asia with the Swiss private bank Julius Baer, said fund flows in Asia would be affected by international investors' risk appetite. He said European and US stocks were at a bigger discount historically compared with Asian stocks, offering attractive valuations. US corporate earnings had surpassed market expectations and unemployment data had improved, but emerging Asian equities, such as mainland bank stocks, had underperformed because of macroeconomic factors and monetary policies, Matthews said. The US equity markets had inflows of US$7.3 billion, an eight-week high, in the week to November 9, EFPR data showed. Developed Europe equity funds had outflows of US$757 million. Brokers said institutional investors' risk appetite had fallen sharply since August, and any optimism generated by suggestions that Europe was inching towards a solution to its debt crisis was short-lived. Asian markets would continue to be overshadowed by declining exports, high inflation and uncertainty over monetary policies, they said. Safe havens such as gold and bonds were absorbing funds as investors became risk-averse.