July 18 (Reuters) – Foreign investors sold a combined net $5.08 billion worth of Indonesian, Thai, Malaysian, South Korean and Indian bonds last month, marking the biggest monthly outflow since March, according to regulatory data and bond market associations.
Emerging Asian bonds were hit by a surge in US yields and a surge in the US dollar, making riskier assets less attractive.
As major central banks seek to raise interest rates in their effort to tackle soaring inflation, further outflows can be expected from regional markets, analysts said.
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Fears of a global economic recession have accelerated in recent weeks, with economists expecting rising interest rates and inflation levels to lead to slowing consumption and sluggish business activity around the world. .
“From an Asian bond perspective, a US recession would be a huge headwind,” Duncan Tan, strategist at DBS Bank, said in a research note last month.
The U.S. dollar index jumped 2.88% last month to its highest level in 19 years, boosted by the hawkish Federal Reserve and demand for safe haven amid economic concerns.
Foreigners sold Indonesian bonds worth $2.13 billion, reducing their cumulative holdings of local-currency government bonds to 15.65% at the end of June, the lowest since at least 2014.
Thai, Malaysian and South Korean debt saw outflows of $1.11 billion, $940 million and $725 million respectively last month, after each attracting inflows a month ago.
Meanwhile, cross-border sales of Indian bonds hit a five-month low of $181 billion as lower global oil prices eased some concerns over its trade deficits with the country being a major importer of crude oil.
The European Central Bank is expected to make its first interest rate hike since 2011 this week, while the US Federal Reserve is expected to raise interest rates by 75 basis points at its July meeting.
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Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Alison Williams
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