Foreign investors have fled emerging Asia bonds, excluding China, for a third successive month in May, hit by worries over aggressive tightening measures to curb soaring inflation.
Overseas investors offloaded a combined net total of $145 million in emerging Asia bonds – South Korean, Thai, Indian, Indonesian and Malaysian – last month, data from regulatory authorities and market associations showed.
“We expect outflows in June and for foreign demand to stay muted in [the second half] as regional fund flows point to still-cautious foreign investment sentiment amid a global rates sell-off.”
Foreigners sold Indonesian bonds worth $2.2 billion, while Indian debt witnessed outflows for a fourth straight month, facing net sales of $715 million in May.
India’s central bank last week raised its key interest rates by 50 basis points in an effort to cool persistently high inflation in Asia’s third-largest economy.
Meanwhile, South Korean bonds obtained inflows worth $2.1 billion, while Thai and Malaysian issues received $553 million and $121 million, respectively.
“Foreign-investor demand climbed, likely reflecting positioning ahead of large maturities as well as sticky hedged asset swap demand,” Barclays said in a note on South Korea.
The US 10-year Treasury yield hit its highest level since 2011 on Monday, on fears of central bank tightening measures after data last week showed US consumer prices marked their largest annual increase in more than 40 years in May.
- Reuters, with additional editing by George Russell