This year was tipped to be the one when U.S. interest-rate increases would suck money from emerging markets. It’s not turning out that way in Asia.
Unprecedented economic stimulus from Europe to Japan has prompted investors to pump a combined $14.4 billion into Indian, South Korean and Indonesian local-currency government debt this year, the most on record for the three markets, exchange data show. That’s helped cut the average yield on emerging-market sovereign notes in Asia by 21 basis points to 4.19 percent, compared with the 4.72 percent for developing nations globally.
The flows underscore the growing investor conviction that as the Federal Reserve prepares to raise U.S. borrowing costs for the first time in nine years, Asia is best-placed to weather the impact. While falling oil prices are supporting the external balances of nations from India to Turkey, political and corporate scandals in Brazil and Argentina are sapping confidence in Latin America and the crisis in Ukraine is fueling a cash exodus from Central Europe.
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