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Markets

South Korean bonds lead foreign inflows into Asian bonds in January

Foreigners purchased a net $3.87 billion worth of South Korean bonds, the most since June 2019, data from Korea Fin
Published February 13, 2020
  • Foreigners purchased a net $3.87 billion worth of South Korean bonds, the most since June 2019, data from Korea Financial Supervisory Service showed.
  • Indonesian, Malaysian and Thai bonds received inflows of $1.11 billion, $871 million and $315 million, respectively, last month.

South Korean bonds garnered most of Asia's foreign inflows in January, as investors sought safer havens, preferring an economy with strong forex reserves and credit ratings after the onset of the coronavirus epidemic in China.

Foreigners purchased a net $3.87 billion worth of South Korean bonds, the most since June 2019, data from Korea Financial Supervisory Service showed.

The large net inflows into South Korean bonds for January are mostly risk aversion trades due to the coronavirus outbreak, said Duncan Tan, a strategist at DBS Bank.

"Investors typically see South Korean Treasury bonds as a safe haven and use it to hedge risk in times of volatility. The country has a high credit rating with large current account surplus and sizable fx reserves," he said.

Thanks to the strong inflows into South Korean bonds, the region received the highest foreign money in seven months in January, data from regional banks and bond market associations in Indonesia, Malaysia, Thailand, South Korea and India showed.

Foreigners bought a net $4.54 billion worth of bonds in the five markets, the data showed.

Indonesian, Malaysian and Thai bonds received inflows of $1.11 billion, $871 million and $315 million, respectively, last month. Analysts said the rate cut expectations boosted money flows into the three markets last month.

Both the Malaysia and Thai central banks have cut their policy rates by 25 basis points this year.

Bank Indonesia is slated to conduct its monetary policy meeting on Feb. 20.

Bucking the trend, Indian bonds faced an outflow of $1.63 billion, the highest since May 2018.

Indian bonds faced the third straight month of net selling as inflation surprised further on the upside, breaching the upper limit of the RBI's 2pc-6pc target band, Khoon Goh, head of Asia research at ANZ Banking Group, said in a report.

India's retail inflation accelerated to 7.59pc in January from 7.35pc in December.

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