Asian bonds see largest monthly outflow of foreign capital since March 2020


A South Korean 10,000 won note is seen on U.S. 100 dollar bills in this illustration taken in Seoul, South Korea December 15, 2015. REUTERS/Kim Hong-Ji

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April 12 (Reuters) – Asian bonds saw their biggest monthly outflow overseas in two years last month, weighed down by the strengthening dollar and rising interest rates overseas, and analysts said expect these sales to continue in the coming months.

Foreign investors offloaded a combined net $7.87 billion worth of South Korean, Thai, Indian, Indonesian and Malaysian bonds last month, marking their first net sale since May 2020, according to regulator data. and bond market associations.

Monthly flows of foreign investments: Asian bonds

Eugene Leow, strategist at DBS Bank, said a relentless rise in dollar rates due to a tight Federal Reserve affected Asian bonds last month.

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“With US rates no longer low in absolute terms, there is collateral damage to emerging/Asian market government bonds,” he said.

The U.S. dollar index jumped 1.7% last month, posting its biggest gain in four months, on expectations of two half-point rate hikes from the Federal Reserve this year.

The Fed raised interest rates for the first time in three years last month.

Foreigners sold Indonesian bonds worth $3.37 billion and Thai bonds worth $3.08 billion last month.

Holdings of foreign investors in Asian bonds

Malaysian and Indian bonds also faced outflows of $958 million and $741 million, respectively.

Meanwhile, South Korean bonds saw inflows of $279 million, the lowest since December 2020.

South Korea has raised interest rates three times since August last year, and some analysts expect further tightening measures from Asian central banks to counter foreign capital outflows this year.

“With inflationary pressures rising due to high commodity prices, Asian central banks are increasingly eyeing rate hikes,” said Khoon Goh, head of Asia research at ANZ Bank.

“That, coupled with the fact that the Fed is about to embark on quantitative tightening, will keep portfolio flows volatile in the region in the near term.”

Monetary policy at Taiwan’s central bank will move in the direction of tightening this year, its governor said last month. Read more

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Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Subhranshu Sahu

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