India bonds so hot to foreigners they’ve bought all they can
mumbai — Overseas investors just can’t get enough of Indian bonds.
Attracted by one of the highest yields in Asia, foreigners bid for 104.42 billion rupees ($1.6 billion) of corporate debt quotas, exceeding the 74.18-billion rupee target and taking inflows to near the overall cap of $51 billion. On Tuesday, the government got bids for 1.3 times the quotas being offered, exhausting 99.63 per cent of the cap on sovereign debt.
The success of the quota auctions means global funds don’t have much room to add to their purchases, undermining ongoing borrowing plans of companies. The nation’s caps on foreign ownership of its debt have been a sore point with fund managers chasing returns in one of the world’s fastestgrowing economy.
“Companies should be able to access capital at lower rates, and given the size and liquidity of the local corporate market, without controls,” said Kenneth Akintewe, senior manager at Aberdeen Asset Management in Singapore. “A good starting point would be to remove the limits on corporate bonds.”
Wednesday’s sale was the first for corporate debt after the market regulator in November 2012 allowed global funds to invest without seeking approval until overall holdings touched 90 per cent of the cap, a limit that was raised to 95 per cent last week.
Foreigners own about 7.5 per cent of India’s government and corporate debt, compared with 30 per cent in Indonesia and Malaysia, according to Aberdeen Asset. Even China has intensified efforts to draw overseas investors to its onshore debt market, kick-starting a trading link with Hong Kong this month.
Indian policy makers have been reluctant to ease the curbs to shield markets against capital outflows as global central banks prepare to unwind stimulus. — Bloomberg