Emerging East Asia bond markets bounce back

Emerging East Asia bond markets bounce back

Local and offshore demand for emerging East Asia’s local currency bonds is rising again and should continue given strong economic growth prospects in the region, said the Asian Development Bank’s (ADB) latest Asia Bond Monitor.

“Most emerging East Asia bond markets have regained their bounce,” Iwan J. Azis, Head of ADB’s Office of Regional Economic Integration said in a press release on June 4. “Thailand’s bonds though could buck the trend given recent political upheavals and investors there are likely to be cautious for some time.”

Despite the recent improvements, the Asia Bond Monitor warns that markets could still be jolted by the ongoing tapering in US quantitative easing, the slowdown in economic growth in China, or moves by the European Central Bank to counter the threat of deflation. Only by taking the lead in implementing better regulation and oversight of the financial system can Asia mitigate these risks.

According to the press release, emerging East Asia is defined as China, Hong Kong (China), Indonesia, Republic of Korea, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

Bond yields – which fall as demand increases – declined in most economies in the first four months of the year, dropping most in Indonesia, Thailand, and Vietnam. However, investors in Thai bonds are now on the sidelines and yields could rise going forward. Meanwhile, yields in the Philippines went up in January through April amid rising inflation.

The markets also continue to grow in size with 7.6 trillion USD in bonds outstanding in the nine economies at the end of March, up 2.1 percent on the quarter and 9.5 percent higher than a year earlier. Vietnam’s was the fastest growing market on a quarterly basis while Indonesia’s market grew fastest on an annual basis.

Thailand had 281 billion USD in outstanding baht-denominated bonds as of the end of March, 1.2 percent more than at the end of December 2013 and 5.7 percent more than at the end of March 2013.-VNA

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