By Gaurav Dogra

(Reuters) – Asian bonds saw their lowest foreign inflow in October this year, due to concerns about higher inflation and a slowerdown in China’s economic growth.

International investors bought a net sum of $2.25 trillion in Indonesian, Malaysian South Korean, Thai, and Indian bonds. It was the largest buying activity since December 2020 according to data from bond market associations and regulatory agencies.

Duncan Tan, DBS Bank strategist said that Sentiments towards Emerging Asia Bonds deteriorated rapidly in October due to the global shock to short-term rates.

International investors also worry about the adverse effects of higher energy prices on Asia’s broader outlook. Foreign flows into Asian bonds, https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgdlxrpb/Foreign%20flows%20into%20Asian%20bonds.jpg

For the 10th consecutive October, South Korean bonds received foreign currency for about half of September’s inflows.

According to the data, South Korean bonds have so far secured $49.5 billion this year. That’s more than 85% of money received from five main markets in the area.

Malaysian bonds attracted $711million, marking the third consecutive month of inflows. This was due to higher oil prices, and the hope that the coronavirus restrictions will be lifted in the fourth quarter.

Thai bonds saw a net increase of $480 million due to better economic activity and the reopening travel sector.

The outflows occurred in India and Indonesia, the two countries with the highest yields, last month.

Last week the Fed declared that it will reduce bond buying by 15% per month beginning in November. It also left the door open for the Fed to increase or decrease the pace of its purchases as required.

KhoonGoh, Head of Asia Research at ANZ Bank, said that “The U.S. Federal Reserve started to taper its bond purchases” and that markets expect rate increases in the second quarter of 2022.

Market volatility will result from any shift in market prices towards rate hikes earlier, which could impact portfolio flows to Asia. Foreign investors’ holdings in Asian bonds, https://tmsnrt.rs/3kvN8Sq

Additional Reporting from Patturaja Murugaboopathy, Bengaluru. Editing by RashmiAich