Foreign buying of Asian bonds drops to 7-month low

BENGALURU: Optimism over a Sino-US trade deal propped up overseas buying of Asian bonds in November, but some country-specific factors triggered sharp outflows.

Regional bonds got a combined net inflow of US$536 million (RM2.22 billion) last month, the lowest in seven months, according to data from regional banks and bond market associations in Indonesia, Malaysia, Thailand, South Korea and India.

Malaysian bonds attracted US$1.92 billion, the highest in region.

Indonesia got US$661 million worth of foreign money last month.

But South Korean bonds faced US$1.5 billion worth of outflows on concerns over its weak exports and the liquidity issues in Lime Asset Management, the country’s largest hedge fund.

India and Taiwanese bonds had outflows of US$319 million and US$221 million respectively.

Khoon Goh, head of Asia research at ANZ Banking Group, said he expects continued bond inflows into emerging-market Asia outside China over the coming months, but the pace of inflows would be more moderate compared with 2019.

“The US-China phase-one deal removes a big headwind, but with the Fed done with the easing cycle and Asian central banks also close to theirs, there will be less of a big driver for bond inflows in 2020 compared to this year,” he said.

Meanwhile, in Jakarta, a finance ministry official said Indonesia plans to cut back its retail bond issuance next year after a sharp increase in 2019 led to weak sales.

Indonesia doubled the number its retail bond offerings to 10 times this year, with an aim to raise 80 trillion rupiah (RM24 billion). However, the government ended up raising just 49.9 trillion rupiah from its 10 retail bond offerings.

The government would seek to raise around 40 trillion rupiah to 60 trillion rupiah in 2020 from retail bonds, Luky Alfirman, head of the ministry’s financing department, said, according to a local news website. – Reuters