Emerging East Asia's local bond markets grow
MANILA, Philippines: Emerging East Asia's local currency bond markets
expanded 12.1% year-on-year to $6.7 trillion at the end of March 2013,
driven by double-digit growth in corporate bonds, according to the
latest edition of the Asian Development Bank's (ADB) Asia Bond Monitor.
"We should see further growth in the bond markets given the region's
economies are continuing to expand and with foreign and domestic
investors increasingly comfortable with Asian local currency debt," said
Head of ADB's Office of Regional Economic Integration, Iwan J. Azis.
"Governments and companies are also much better now at managing their
debt than they were a decade ago."
The quarterly Asia Bond Monitor assesses the bond markets of the PRC,
Hong Kong, China, Indonesia, the Republic of Korea, Malaysia, the
Philippines, Singapore, Thailand and Vietnam.
The region's local currency bond markets now constitute a larger
portion of their economies than they did three months or even a year
ago, at 54.8% of gross domestic product at the end of March, versus
54.6% at the end of December 2012 and 52.8% at the end of March 2012.
The region's corporate bond market expanded 19.5% year-on-year and
4.6% quarter-on-quarter to $2.4 trillion at the end of March. Meanwhile,
the government bond market grew at a more modest annual pace of 8.3% and
a quarterly rate of 2.0% to $4.3 trillion.
Indonesia had the fastest growing corporate bond market in the region
during the first quarter, expanding 26.9% year-on-year to $20 billion,
followed by the People's Republic of China (PRC), which had the region's
largest corporate bond market at $1.1 trillion, up 25.3% year-on-year.
Vietnam registered the most rapid year-on-year growth in the
government bond market, posting a 64.6% expansion to $29 billion,
fuelled by heavy issuance of Treasury, Central Bank, and state-owned
enterprise bonds. In contrast, the country's corporate bond market
shrank 47.2% to $1 billion.
Foreign holdings of most emerging East Asian local currency
government bonds continued to rise in the first quarter with yields in
the region more attractive than those in the US and many European
markets and on the perception that Asian credit quality is on a par, if
not better, compared to advanced economies, said the report.
Foreign holdings accounted for 32.6% of Indonesian local currency
government bonds as of end-March, the largest among emerging East Asian
economies. Malaysia followed closely with foreign holdings reaching
31.2%.
Yields on most government bonds have been trending lower since the
end of 2012 in the region as inflation moderates and with policy rates
largely unchanged. The only exceptions are Hong Kong, China, Indonesia,
and Singapore where government bond yields have risen for most
maturities since the beginning of 2013 due to inflationary concerns.
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