Asian bond outflows in September hit 3-1/2-year high on slowdown concerns

(Reuters) -Asian bonds experienced significant outflows in September, driven by a selloff in Indonesia amid rising fiscal and political concerns, alongside a broader slowdown in regional economic activity that dampened investor sentiment.

Foreigners offloaded a net $5.48 billion worth of regional bonds - the most since March 2022 - in Indonesia, Malaysia, Thailand, India and South Korea, data from local regulatory authorities and bond market associations showed.

Indonesian bonds recorded a net foreign outflow of $4.6 billion in September, the largest monthly outflow since at least 2016, as fiscal concerns intensified following widespread protests and the abrupt removal of Finance Minister Sri Mulyani Indrawati.

Foreigners also shed a net $1.63 billion worth of Malaysian bonds in their biggest monthly disposal since October 2024.

Industrial production in most of Asia's major economies weakened in September, weighed down by signs of lacklustre U.S. growth, the anticipated effects of President Donald Trump's tariffs, and persistently soft demand from China.

"Weakness in domestic demand will also continue to constrain growth in most of the region," Khoon Goh, head of Asia research at ANZ, said in a report earlier this month.

"As a result, Asian assets could be less supported over the medium term," ANZ's Goh said.

Last month, South Korean, Indian and Thai bonds saw minor inflows of $563 million, $124 million and $60 million, respectively.

(Reporting by Gaurav Dogra; Editing by Sherry Jacob-Phillips)

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