By Gaurav Dogra
(Reuters) – Emerging Asian bonds ex-China attracted the biggest monthly foreign inflow in five months in January, as some signs of economic recovery in the region eased concerns over monetary policy tightening by major central banks.
Overseas investors purchased a combined net total of $7.39 billion in South Korean, Thai, Indian, Indonesian, and Malaysian bonds last month, their biggest net buying since August, data from regulatory authorities and bond market associations showed.
GRAPHIC – Monthly foreign investment flows: Asian bonds
https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwxbgepo/Monthly%20foreign%20investment%20flows%20Asian%20bonds.jpg
Data released last month showed the South Korean economy expanded at the fastest pace in 11 years in 2021. Indonesia and Malaysia showed signs of improvement in the final quarter of last year, with a rise in domestic consumption.
“Overall flow picture in January underlines the attractive risk reward profile of Asia local currency yield bonds for global investors,” said Jennifer Kusuma, Asia rates strategist at ANZ.
Thai bonds attracted $2.08 billion worth of foreign money last month, the biggest since July 2014, as rising exports and easing COVID-19 curbs boosted hopes of an economic recovery.[L1N2U1091]
South Korean, Malaysian and Indian bonds saw overseas capital worth $3.05 billion, $825 million and $698 million, respectively.
“In the current environment where U.S. rates are rising, but the U.S. dollar is not particularly strong, Asia bonds would be expected to outperform,” said Duncan Tan, a strategist at DBS Bank.
Meanwhile, Indonesian bonds saw outflows easing to a five-month low of $282 million.
“I think it’s probably too early to sound an all clear for EM/Asia govvies,” said Eugene Leow, a strategist at DBS Bank.
“The market is still contending with Fed normalisation and geopolitical risks around Ukraine.”
GRAPHIC – Foreign investors holdings in Asian bonds
https://fingfx.thomsonreuters.com/gfx/mkt/klpykmrlypg/Foreign%20investors%20holdings%20in%20Asian%20bonds.jpg
(Reporting by Gaurav Dogra in Bengaluru; Editing by Subhranshu Sahu)
