Foreign investors turn net sellers of Asian bonds in Feb on Covid-19 fears

Foreign investors dumped Asian bonds in February on mounting fears over the economic damage done by the coronavirus pandemic on regional countries.

Foreigners sold a net $3.88 billion worth of regional bonds last month, their largest net selling since April 2018, according to data from regional banks and bond market associations in Indonesia, Malaysia, Thailand, South Korea and India.

"Foreign holders were also concerned about Asia FX weakness, especially currencies most-reliant on exports and tourism. Expectations of lower tax receipts and announced stimulus packages suggest larger bond supply ahead and higher fiscal risks." said Duncan Tan, a strategist at DBS Bank.

Indonesian and Malaysian debt led regional outflows in February. Foreigners net sold $2.02 billion worth of Indonesian debt, biggest since September 2011 and about $1.94 billion worth of Malaysian bonds.

Foreigners also sold $599 million in Thai bonds in the previous month.

However in February, South Korea and India received inflows of $475 million and $300 million, respectively, in net inflows.

"As long as global markets are volatile and infections continue to broaden globally, the outlook for Asia bond flows would be skewed to the downside," said DBS Bank's Tan.

Foreigners have continued to sell Asian bonds so far in March as the virus outbreak spread across the world, killing more than 8,700 across the world and infecting more than 212,000. Data showed overseas investors sold $4.29 billion worth of Indonesian bonds as of March 17 and they sold $ 5.44 billion worth of Indian bonds as of Wednesday.