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Emerging Asia investors may finally be turning more cautious

Korean tensions and US monetary policy recognized as prime 'tail risks'

| China
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  © Reuters

Despite the dramatic escalation of tensions on the Korean peninsula and the resolve of the U.S. Federal Reserve to withdraw monetary stimulus, Asian government debt is still benefitting from hefty inflows. This year's cumulative inflows are already more than five times higher than for the whole of 2016, JPMorgan data show. But a tempering of investor enthusiasm for emerging Asian markets would be no bad thing, especially for the region's frothy corporate debt.

Since April, foreign investors have purchased nearly $50 billion of domestic bonds in emerging Asian markets, including more than $4 billion in August, when U.S. President Donald Trump vowed to meet the threat posed by North Korea's nuclear program with "fire and fury." Pyongyang responded by launching a ballistic missile that flew over Japan, for the first time since 1998.

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