GRAPHIC-Malaysian bonds a haven for foreigners fleeing other Asian markets on rate fears

Credit: REUTERS/EDGAR SU

By Gaurav Dogra and Ankur Banerjee

March 16 (Reuters) - Foreigners sought shelter in Malaysian bonds last month, buoyed by improving growth outlook and low prospects of further policy rate hikes by the country's central bank, with overseas money pouring out of regional peers.

In February, foreigners purchased about $950 million worth of Malaysian bonds, the most since August, but sold a combined $2.1 billion worth of Indonesian, South Korean and Thai bonds, data from regulatory authorities and bond market associations showed.

Appetite for Malaysian bonds increased last month after data showed robust economic performance in the final quarter of last year and inflation eased further in January.

Bank Negara Malaysia left its benchmark interest rate MYINTR=ECIunchanged for the second consecutive meeting earlier this month on expectations of a slowdown in global economic growth and amid uncertainty about the path the U.S. Federal Reserve will take at its meeting next week.

Maybank's head of fixed-Income research, Winson Phoon, said Malaysian inflows likely concentrated in the front and mid tenors due to attractive dollar-hedged ringgit yields versus U.S. Treasuries, as well as better clarity over peak interest rate from Malaysia' central bank.

Investors had been worried that the Fed might go back to its aggressive tightening path amid a resilient U.S. economy, but the banking crisis that has unfolded over the last week in the wake of the collapse of Silicon Valley Bank has changed the outlook for interest rates.

Investors are now wary of the risks of outflows in the near term in Asian bonds.

"What's happening in the U.S. with so much volatility is having a lot of residual effects on markets everywhere," said Galvin Chia, emerging markets strategist at NatWest Markets.

"It will take months probably to reveal the true extent of these shocks in the U.S. system ... that kind of worries me because it may mean that we're not through this yet."

Meanwhile, most other countries in Asia saw outflows, with Thai bonds witnessing $1.22 billion worth of net selling, the biggest since March 2022, as worries over slowing exports and rising trade deficit hurt sentiment.

Duncan Tan, a strategist at DBS Bank, said Asian bonds had rallied on a plunge in U.S. rates and a weaker dollar, but the near-term worries of severe risk aversion could trigger outflows.

Monthly foreign investment flows: Asian bondshttps://tmsnrt.rs/3LnM7dv

(Reporting By Gaurav Dogra in Bengaluru and Ankur Banerjee in Singapore; Editing by Subhranshu Sahu)

((patturaja.murugaboopathy@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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