Funds flock to India, Indonesia to escape slumping yields

SINGAPORE: Never mind the trade war. A looming US interest-rate cut is set to replace tariff headlines as the key driver of developing Asian bonds, according to money managers.As traders count down to the Group of 20 summit this week, global funds are looking beyond the outcome to focus on an expected easing in Federal Reserve policy. Portfolio managers reason that regional central banks are likely to follow in the Fed’s footsteps, and this would galvanise demand for Asian bonds.

“The good news is the high yielders – the Philippines, India, Indonesia – have central banks that hiked significantly over the last 18 months as the Fed was tightening policy,” said Mark Baker, investment manager of emerging-market debt at Aberdeen Standard Invest-ments Ltd in Hong Kong. “It’s natural to look to these markets as the first places to reverse some of that tightening.”