Asian May Bonds See Highest Foreign Inflows in Two Years

May saw the largest monthly foreign inflows into Asian bonds in about two years on the expectation that the Federal Reserve will let off on its policy of hawking stance.

Reuters reported on Tuesday that foreign investors purchased a net of $10,1 billion in bonds from India, Indonesia, Malaysia, South Korea, and Thailand, their largest monthly purchase since June 2021.

The Federal Reserve left interest rates unchanged at the meeting last week, but signaled that there could be two small hikes by the end of this year.

The U.S. central bank maintained its policy rate at 5-5.25%, with Fed Chair Jerome Powell stating in a press conference following the meeting that the country’s economic growth and the labor market are holding up better than anticipated despite the aggressive monetary policy tightening of the past year.

Analysts also said that investors were buoyed by indications that economies across Asia had reached their inflation peaks, paving the way for expected interest rate reductions by central banks to stimulate economic growth.

There was a foreign inflow of $400 million into Thailand’s bonds last month, while $652 million and $500 million respectively entered the bond markets of Malaysia and Indonesia.

The Thai Ministry of Commerce said on Tuesday that during the first five months of this year, 274 foreign investors submitted for investment promotion, totaling THB45.4 billion baht, a decrease of 18% from the same period last year.

Japan topped the FDI value rankings with 16 projects totaling THB15.9 billion, followed by the United States with THB2.4 billion for 48 projects, Singapore with THB6.4 billion baht for 46 projects, China with THB11.5 billion for 19 projects, and Hong Kong with THB3.0 billion for 12 projects.