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Bond funds pile into swath of Asia's emerging markets for first time since 2021

Aug 22, 2024

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3 min read

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Bond funds pile into swath of Asia's emerging markets for first time since 2021
Tuk-tuk vehicles travelling through the Jatinegara Market in Jakarta, Indonesia. While many emerging economies in Asia are expected to cut interest rates along with the Federal Reserve, the quantum of easing is forecast to be less than it will be in the US.
 
(Aug 21): Five of the largest emerging Asian bond markets are jointly receiving net inflows for the first time in three years, suggesting that investors are getting more upbeat on the asset class.

Overseas funds have boosted holdings of debt in each of South Korea, Thailand, Indonesia, India and Malaysia since the start of July, according to data compiled by Bloomberg. If the inflows continue through the end of September, it would be something that hasn’t been seen on a quarterly basis since the middle of 2021. 

“Many global investors would have been underweight on lower-yielding Asian bonds — but once Fed cuts became more certain, they had to reduce that underweight,” said Charlie Robertson, the head of macro strategy at FIM Partners. “US dollar weakness has also reopened the prospect of rate cuts” in the region.

The broad-based inflows indicate investors are turning more positive on emerging-market debt as a whole as the Federal Reserve (Fed) moves closer to cutting interest rates. That contrasts with the underperformance of developing-nation bonds during the US central bank’s period of higher-for-longer borrowing costs.

While many emerging economies in Asia are expected to cut interest rates along with the Fed, the quantum of easing is forecast to be less than it will be in the US. For example, investors are pricing in roughly two percentage points of rate cuts for the Fed by the end of 2025, but only about 75 basis points in South Korea during the same period, swap markets showed.

Bond funds pile into swath of Asia's emerging markets for first time since 2021

Source: Bond funds pile into swath of Asia's emerging markets for first time since 2021 (2024, 21 August). theedgemalaysia.com. Retrieved from https://theedgemalaysia.com/node/723629

 
 
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The information provided in this report is of a general nature and has been prepared for information purposes only. It is not intended to constitute research or as advice for any investor. The information in this report is not and should not be construed or considered as an offer, recommendation or solicitation for investments. Investors are advised to make their own independent evaluation of the information contained in this report, consider their own individual investment objectives, financial situation and particular needs and should seek appropriate personalised financial advice from a qualified professional to suit individual circumstances and risk profile. The information contained in this report is prepared from data believed to be correct and reliable at the time of issuance of this report. While every effort is made to ensure the information is up-to-date and correct, Bond and Sukuk Information Platform Sdn Bhd (“the Company”) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information contained in this report and accordingly, neither the Company nor any of its affiliates nor its related persons shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.

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