May Brings Record Monthly Purchases for Asia's Bond Market
Investing.com - In May, the Asian bond market experienced its highest monthly foreign inflows in approximately two years, fueled by expectations of less aggressive monetary tightening measures from the US Federal Reserve. Investors purchased a net $10.1 billion worth of bonds across India, Indonesia, Malaysia, South Korea and Thailand – marking their largest monthly purchases since June 2021.
Although interest rates were maintained without change after ten consecutive rate hikes by the US Federal Reserve, there are indications that two small rate hikes might be implemented by year-end to address inflation concerns. Analysts also noted that investors found encouragement from signs suggesting regional economies had reached peak inflation levels which may lead central banks to introduce interest rate cuts aimed at stimulating economic growth.
South Korean bonds saw net purchases totaling $8.2 billion - their highest level since June 2021. Experts believe that this increased appeal could stem from speculation regarding potential rate cuts towards year-end by Bank of Korea. Malaysia and Indonesian bonds received foreign inflows worth $652 million and $500 million respectively while Indian and Thai bonds each attracted around $400 million during last month.
The weaker-than-anticipated Chinese data in May coupled with tensions between China and the United States may have pushed investors to redirect bond flows out of China into other Asian nations.
BoJ Meeting Minutes Reveal Unchanged Monetary Policies
On Wednesday, minutes from April’s Bank of Japan (BoJ) monetary policy meeting will be released, highlighting a light day for Asia-Pacific economic activity. During the meeting, the BoJ's Policy Board unanimously decided to maintain a negative interest rate of -0.1% on current accounts held by financial institutions at the central bank and also agreed to keep its yield curve control policy unchanged.
A Reuters poll revealed that most economists anticipate government and BoJ action if the Japanese Yen experiences a decline reaching 145 per US Dollar level. As such, market participants will look for any hints regarding potential intervention when June’s BoJ minutes are released in early Asian trading session on Wednesday.
Weaker Oil Prices Contribute to Sluggish South Korean Producer Inflation
Investing.com - South Korea's producer inflation slowed down in May, marking its weakest pace in nearly two-and-a-half years due primarily to declining oil prices. Data from the Bank of Korea (BOK) showed that the producer price index was up by only 0.6% compared to last year – following a rise of 1.6% recorded in April.
This latest figure represents an eleventh consecutive month of weakening annual rates and is indicative of the slowest level since December 2020. A BOK official stated during a media briefing that it remains unclear whether this trend would continue into June as both upside and downside factors are currently at play.
On a monthly basis, however, May's index fell by 0.3%, accelerating from April's decline of just 0.1%. The drop was led primarily by coal and petroleum products.