India, Indonesia debt outperforms China despite global selloff

The two countries' sovereign debt only lost 0.4% and 1.5% respectively for dollar-based investors in the third quarter, less than other emerging markets in Asia including China, according to data compiled by Bloomberg. Indian and Indonesian bonds are offering shelter from extreme volatility in global markets. "Amid the global selloff in the third quarter, the higher yields on Indonesia and India bonds have provided a bigger offset to bond price losses," said Duncan Tan, a rates strategist at DBS Group Holdings Ltd. Indian and Indonesian notes have the widest spreads in emerging Asia, helping to shield investors from the turmoil in US Treasuries, which had the longest string of quarterly losses in almost a decade. "Relative resiliency in their currencies was also key, with the rupiah continuing to benefit from the commodity tailwind and the rupee supported by larger Reserve Bank of India intervention," Singapore-based Tan added. Local dynamics have played an important role in supporting the outperformance of India and Indonesia debt. India's notes have been supported by foreign inflows and signs that the market is nearing the peak in the rate hike cycle. Another positive is the prospect of inclusion into global indexes, although JPMorgan Chase & Co. said this week it would hold off from adding India bonds to its EM sovereign bond index for now.