* Asia markets likely to extend rally on foreign inflows
* Foreign net inflows to Asia at 48-week high
* China, Taiwan, S. Korea biggest winners
(Repeating item first carried on Thursday with no change to text)
By Faith Hung and Kevin Plumberg
TAIPEI/HONG KONG, April 30 (Reuters) - After a six-month drought, foreign investors have been sending billions of dollars back to Asia, a trend some expect to continue on hopes China will lead the region out of the global economic recession.
Foreigners have poured a net $6 billion into six major Asian markets since early March, according to BNP Paribas, helping to boost China, Taiwan and South Korean stocks by up to 35 percent this year and making them the world's best performers.
Regional government efforts to drive their economies out of recession by aggressively cutting interest rates and spending billions of dollars on stimulus packages, especially the $600 billion one implemented by China, are fuelling international investor appetite for risk after months of caution.
"I think it's time to be in risky assets. The rally we've seen since March is the start of a new bull market," said Anthony Bolton, president for investments of Fidelity International, an affiliate of the world's top mutual fund firm Fidelity Investments, on a trip this week to Taiwan.
"I started to put in money in September, November, and then January and March. We are buying China-focused funds," said Bolton, whose contrarian bets made him a top U.K. fund manager for more than two decades.
China's official Purchasing Managers' Index (PMI) for March, rose to 52.4 from 49.0 in February, marking its first time in expansionary territory since September, a rebound that Beijing said the economy may have bottomed. [ID:nPEK25397]
The index is a key survey of the manufacturing sector, showing managers felt cautiously optimistic about the next few months.
To view two graphs on foreign fund inflows and stock market gains in Asia since March, please click on: https://customers.reuters.com/d/graphics/AS_FLWS0409.jpg https://customers.reuters.com/d/graphics/AS_FLWS20409.jpg
CHINA LEADS
The massive inflows to China plays and other emerging markets contrast with outflows from developed markets, a sign foreign investors bet China will lead Asia out of the global recession.
Emerging market equity funds have received inflows of $7.3 billion so far this year, compared with outflows of $56.1 billion for developed market equity funds, fund flow tracker EPFR Global said in a recent report.
In the past week alone, foreigners purchased $1.6 billion worth of Asian equities, their second-highest buying level in 48 weeks. Meantime, mutual fund buying was at a 50-week high of $946 million, Nomura International said in a report.
China equity funds absorbed another $243 million and Taiwan equity funds posted their highest weekly inflows in nearly a year, said EPFR.
Fund managers said they favoured shares of infrastructure, raw materials, personal computer makers and China plays on expectations they will continue to benefit from China's massive economic stimulus.
"China's determination to sustain 8 percent-plus GDP growth remains the cornerstone of the latest surge in risk appetite," EPFR Global senior analyst Cameron Brandt wrote in the report. Bratin Sanyal, head of Asian equity investment for ING Investment Management in Hong Kong, shared a similar view.
"We believe the bigger economies in Asia are going to come out of the downturn more quickly. China, India and Indonesia remain our favourite markets along with Singapore and Hong Kong because they add some stability to our portfolios with companies that are liquid.
STABILISING FORCE
Fund managers said recent interest in Asia by foreign funds is likely to stabilise those markets, as many fund managers buy in on dips after missing initial rallies.
"Many institutional investors are worried stocks have risen too much, too fast. They are waiting for any pull-back as an opportunity to build up their positions," said Wendy Kuo, chief investment officer of Yuanta Funds.
Yuanta's funds, with $3.3 billion of client assets, recently bought shares of Ping An Insurance <2318.HK>, Nine Dragon Paper <2689.HK> and carmaker Dongfeng Group <0489.HK>, all Chinese firms listed in Hong Kong, Kuo said.
China-listed shares in its two exchanges in Shanghai and Shenzhen are closed to all but a handful of foreign buyers.
Jamie Cumming, a senior investment manager on the global equity team of Aberdeen Asset Managers in Edinburgh, said he gradually added cyclical names, materials and industrials, including Chinese oil refiner PetroChina <0857.HK> and Taiwanese chip maker TSMC <TSM.N> at the start of the year.
Still, some fund managers advised caution.
"Globally, policymakers have added $2 trillion in stimulus but global equity markets have lost $15 trillion in market cap since the peak of the last bull market," said Mark Matthews, Asia Pacific strategist with Fox Pitt Kelton in Hong Kong.
"People are misconstruing some of the sequential improvements in numbers for an economic recovery. It's not an economic recovery and I don't think we are anywhere near an economic recovery."
