For the first time in three months, foreign capital net purchased Asian bonds worth USD 311 million in August
In August, Asian bonds welcomed their first net inflow of foreign capital in three months, with a net purchase amount of USD 311 million. The market expects that the Federal Reserve's interest rate cuts will support the labor market and enhance the attractiveness of high-yield emerging market assets. The Federal Reserve announced interest rate cuts and is expected to further cut rates in the future. The bond markets in India and Malaysia saw net purchases of foreign capital, ending a continuous selling trend, while South Korea, Indonesia, and Thailand experienced net outflows of foreign capital
According to Zhitong Finance APP, in August, Asian bonds experienced their first monthly net inflow of foreign capital in three months. Due to market expectations that the Federal Reserve will support a cooling labor market through interest rate cuts, the attractiveness of high-yield emerging market assets has significantly increased, driving foreign capital back to the Asian bond market.
Data from regulatory agencies and bond market associations in countries such as India, Indonesia, Thailand, Malaysia, and South Korea show that last month, foreign capital net purchased Asian bonds worth USD 311 million, marking the first monthly net purchase since May.
The Federal Reserve announced an interest rate cut on Wednesday, the first since December of last year. The Fed stated that the reason for this rate cut is the increasing risks facing the labor market; at the same time, with a slight rise in the unemployment rate, shorter working hours, and other signs of weakness emerging, the Fed hinted at further rate cuts in the future.
Khoon Goh, Head of Asian Research at ANZ, stated, "We expect the cumulative rate cut by the Federal Reserve to reach 125 basis points, with the federal funds rate dropping to 3.25% by March 2026." He further pointed out, "The easing stance of U.S. monetary policy will support the currency and asset markets in Asia, excluding China."
From a market perspective, last month, foreign capital net purchased Indian bonds worth USD 773 million and Malaysian bonds worth USD 721 million, ending a two-month trend of foreign capital selling in these two markets. However, South Korean, Indonesian, and Thai bonds saw net outflows of foreign capital amounting to USD 447 million, USD 400 million, and USD 337 million, respectively
