Asian bonds draw major inflows from US interest outlook, strong exports By Reuters

(Reuters) – Foreign investors were net buyers of Asian bonds for a third straight month in July, boosted by strong growth in regional exports and expectations of a September interest rate cut by the U.S. Federal Reserve.

Overseas investors bought a net $7.91 billion worth of bonds in Indonesia, India, Malaysia, South Korea and Thailand in July, data from regulators and bond market associations showed, following net accumulations of about $3.03 billion in the previous month.

“Macroeconomic fundamentals in Asia remain positive. This should attract more inflows, especially with the US Federal Reserve on track to cut rates soon,” said Khoon Goh, head of Asia research at ANZ.

Reports indicated that regional economies including China, South Korea and Taiwan recorded higher export volumes in July.

Indonesian bonds attracted a significant $3 billion in July, marking the third consecutive month of net buying, largely driven by foreign investment in Bank Indonesia Rupiah Securities (SRBI).

Demand for Indian bonds rose with a net investment of $2.68 billion, the highest figure in five months, following inclusion in JP Morgan’s emerging market debt index on 28 June.

Indian bonds are expected to gain monthly inflows of about $2 billion until they reach a weight of about 10 percent in the JPMorgan index by March 2025.

Cross-border investors also poured $1.75 billion and $749 million into Malaysian and Thai bonds, respectively, while pulling a net $270 million out of South Korean bonds.

Financial markets saw increased volatility in early August following a weaker-than-expected US payrolls report and disappointing manufacturing data, fueling concerns about an economic slowdown.

A weekly employment report last week, however, showed a drop in jobless claims.

“Last week’s better-than-expected US jobless claims data helped ease market concerns. We think US recession fears are overblown,” ANZ’s Goh said.

“We expect the mix of stable labor market statistics, along with cooling inflation, to keep hopes of a soft US landing alive, which will help portfolio flows into Asia.”