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Asian bonds see foreign inflows for 16th successive month in September

10/19/2021 | 01:28am EST

Oct 19 (Reuters) - Foreigners were net buyers of Asian bonds for a sixteenth consecutive month in September, though the inflows were capped on worries over higher inflation levels and chances of a hawkish shift in major central banks' policy measures.

Overseas investors purchased a combined net total of $3.64 billion in Indonesian, Malaysian, South Korean, Thai and Indian bonds last month, compared with net buying of $7.39 billion in August, data from regulatory authorities and bond market associations showed.

"Bond inflows into Asia moderated in September compared to August, on expectations that Fed tapering is drawing closer which made investors more cautious about buying EM debt," said Khoon Goh, head of Asian research at ANZ.

Leading regional inflows, South Korean bonds received $4.37 billion, which marked a ninth straight month of inflow, while Indian bonds received a net $1.74 billion.

Both South Korea and India witnessed an expansion in business activity last month.

Some analysts said a healthy fiscal position supported inflows into Indian bonds.

Nomura lowered India's fiscal deficit estimate for the fiscal year ending 2022 to 6.2% of GDP from its earlier projection of 6.8%, citing stronger revenues and lower spending.

HSBC analysts last week estimated that India's government bonds are likely to gain inclusion in global indexes in 2022, bringing potential inflows of between $30 billion and $40 billion, which could be a positive sign for bond purchase in nearby future.

Malaysian bonds received $154 million last month, however, the inflows were much lesser than in August.

Last week, the Malaysian government lifted COVID-19 related travel restrictions for fully vaccinated residents, giving more confidence to investors for a quick economic recovery.

Meanwhile, Thailand and Indonesia faced foreign outflows of about $1.3 billion each.

"Concerns over higher borrowing plans in Thailand contributed to the outflows seen from the Thai bond market," said ANZ's Goh.

Last month, the Thai government raised the debt ceiling to 70% of gross domestic product (GDP) from 60%, allowing it to raise more funds to help a flagging economy.

(Reporting by Gaurav Dogra and Anurag Maan in Bengaluru; editing by Uttaresh.V)

ę Reuters 2021
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