Inflation fears trigger biggest Asian bond outflows in four years
Foreign investors sold Asian bonds at the fastest pace in four years in March, with South Korea hit hardest as oil-linked inflation fears rattled markets.
Reuters reported that Asian bond markets recorded their biggest monthly net foreign outflows in four years in March, after disruptions to oil and gas supplies linked to the Middle East conflict fuelled inflation concerns and weighed on investment demand.
Data compiled from bond markets in five Asian countries — South Korea, Thailand, Malaysia, India and Indonesia — showed that foreign investors were net sellers of a combined US$7.57 billion (about 243 billion baht) in March.
That marked the largest monthly capital outflow since March 2022, according to figures from regulators and bond market associations in each country.
Khoon Goh, head of Asia research at ANZ, said investors were trimming their bond holdings because concerns over the inflation outlook were making long-duration assets less attractive.
South Korea’s bond market suffered the heaviest net foreign outflows, at US$7.25 billion, as concerns over rising oil prices outweighed positive sentiment from the inclusion of local government bonds in FTSE Russell’s World Government Bond Index from April.
Foreign investors also sold US$1.8 billion worth of Indonesian bonds and US$708 million of Thai bonds. By contrast, Malaysia and India posted foreign inflows of US$1.52 billion and US$671 million respectively.
Brent crude futures rose about 5.4% to US$95.29 a barrel on Monday amid concerns that a ceasefire between the United States and Iran might not hold, after Washington said it had seized an Iranian cargo vessel that tried to breach its blockade, prompting Tehran to vow retaliation.
US Federal Reserve Governor Christopher Waller said on Friday that the longer energy prices remained elevated and the Strait of Hormuz stayed restricted, the greater the risk that inflation would become embedded across a broad range of goods and services.
