Asian bonds saw renewed interest from foreign investors in October, reversing a sharp decline in cross-border purchases the previous month. Improved regional growth prospects and recent U.S. trade agreements in Southeast Asia lifted investor confidence, leading to net purchases of $368 million in key markets including Indonesia, Malaysia, Thailand, India, and South Korea. This reversed nearly $5.48 billion in net sales recorded in September, according to data from local regulatory authorities and bond market associations.

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U.S. Trade Deals Boost Investor Sentiment

Investors were encouraged by a series of trade agreements signed by U.S. President Donald Trump, which included reciprocal pacts with Malaysia and Cambodia, along with a framework agreement with Thailand designed to address tariff and non-tariff barriers. These developments fueled optimism about economic stability and growth in the region.

Khoon Goh, head of Asia research at ANZ, noted:

“Better-than-expected growth momentum in most economies, artificial intelligence-related optimism, and easing trade tensions were key drivers for increased flows into the region.”

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Country-Specific Bond Inflows

Malaysia led the inflows with $1.05 billion, marking the largest monthly foreign purchase since May. The country’s GDP growth jumped to 5.2% in the July–September quarter, supported by strong domestic demand and a rebound in exports despite lingering U.S. tariff impacts.

Thailand and India also attracted significant investment, receiving $1.04 billion and $397 million, respectively. Meanwhile, Indonesia and South Korea experienced modest outflows, with investors withdrawing $2 billion and $125 million, reflecting a more cautious stance in these markets.

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Regional Outlook

Analysts remain optimistic about continued foreign investment in Asian bonds through the end of the year. Goh added:

“Resilient growth momentum and better-than-expected export demand should support continued inflows in the region heading into year-end.”

The positive sentiment for Asian bonds contrasts with recent U.S. stock market volatility, where the Dow Jones fell more than 1% and both the S&P 500 and Nasdaq declined just under 1% on Monday, highlighting Asia’s relative appeal for foreign investors seeking diversification.

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Implications for Investors

The return of cross-border investment underscores the importance of regional economic recovery, trade policy stability, and technology-driven growth, including sectors related to artificial intelligence, as key drivers of bond market performance. Countries like Malaysia and Thailand are likely to benefit from sustained foreign demand, while Indonesia and South Korea may face continued volatility depending on domestic and global market developments.