Asian bond markets experience foreign capital outflows in December

The Asian bond markets experienced a withdrawal of foreign investors for the second consecutive month in December. The reasons for this are the expected higher US tariffs under designated US President Donald Trump, a slowed relaxation by the Federal Reserve, and reduced regional growth expectations. In December, cross-border investors sold bonds worth a net $3.07 billion in Indonesia, Thailand, Malaysia, India, and South Korea. This followed a net sales value of $2.12 billion in November, according to data from regulatory authorities and bond market associations. In the first three quarters of the previous year, regional bond markets benefited from strong demand and attracted a substantial $36.88 billion in foreign inflows—the highest sum in three years. However, due to macroeconomic uncertainties, there was an outflow of $3.53 billion in the fourth quarter. Khoon Goh, Head of Asia Research at ANZ, expressed expectations that market volatility would increase in 2025 as the tariff plans of the incoming Trump administration become more concrete. "Asia's intra-regional growth issues are also increasing and will affect portfolio flows," Goh explained. President Trump will take office next Monday. The Manufacturing Purchasing Managers' Index from Asia, including China and South Korea, indicated a decline in factory activities due to heightened trade risks from a second Trump presidency and China's uncertain economic recovery. In December, foreign investors withdrew $2.38 billion from South Korean bonds, ending a four-month purchasing period. This occurred against the backdrop of political unrest following the imposition of martial law and the impeachment of President Yoon Suk Yeol. Indonesian bonds recorded net outflows of $1 billion—for the second time in eight months. Meanwhile, Malaysian bonds experienced net sales of $310 million by foreign investors. In contrast, the Indian and Thai bond markets attracted foreign inflows of $445 million and $172 million, respectively, last month.