T Rowe favours Thailand, Malaysia bonds on scope for rate cuts
Malaysia's central bank has potential to deliver several more interest rate cuts after its first policy easing in five years earlier this month, while persistent deflation in Thailand should extend support for its debt despite already-low yields, said Leonard Kwan, a Hong Kong-based portfolio manager at the US asset manager.
Kwan, who manages the firm's Emerging Markets Bond Strategy fund, added he prefers medium-term Thai bonds and longer-dated notes in Malaysia.
The fund had assets worth US$581 million as at Jun 30.
Tailwinds from the US dollar's weakness against the Asian currencies will be 'less powerful than what we saw year to date', Kwan said. He expects a 'consolidative period for the US dollar over the next three to six months' as bearish wagers on the greenback appear excessive.
Kwan's comments signal a rethink among investors as the US dollar has rebounded in the past two weeks, clawing back some of this year's steep losses as fresh inflation data cast doubts on the outlook of US rate cuts.
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Meanwhile, signs of strong consumption and a resilient labour market also helped ease concerns about a tariff-induced recession and a sustained decline of American exceptionalism.
Despite the latest gain, the Bloomberg Dollar Spot Index is down 8 per cent this year. Joining a broader Asian currency rally against the greenback, both the Thai baht and Malaysian ringgit have risen over 5 per cent since 2025 began.
The currency gains have been a key catalyst of the performance of the two nations' local-currency bonds. Thai debt has generated year-to-date total returns of 13.8 per cent this year, with 10.2 per cent for their Malaysian counterpart, Bloomberg data show.
Elsewhere in the region, Kwan said he also likes Indonesian bonds of medium-term maturities, as the firm sees another two-to-three 25-basis-point rate cuts in South-east Asia's biggest economy.
The Indonesian rupiah, in contrast, is Asia's worst-performing currency this year, down 1.3 per cent versus the US dollar. BLOOMBERG
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