AsianBondsOnline Newsletter (6 May 2013)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20130506.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 29 April - 3 May 2013

Standard & Poor's (S&P) last week upgraded its rating for the Philippines' long-term FCY-denominated debt to BBB- from BB+. The rating was given a stable outlook. S&P stated that the upgrade reflects a strengthening external profile, moderating inflation, and the government's declining reliance on FCY debt. Meanwhile, S&P revised Indonesia's sovereign rating outlook to stable from positive last week on the basis of a weakening policy environment and increasing vulnerability in Indonesia's financial profile.

*     In April, consumer price inflation in Indonesia eased to 5.6% year-on-year (y-o-y), from 5.9% in March, due to lower food prices. In the Republic of Korea, inflation slowed marginally to 1.2% y-o-y in April from 1.3% in March. In Thailand, inflation moderated to 2.4% y-o-y in April from 2.7% in March. However, on a month-on-month (m-o-m) basis, inflation rose 0.2% in April due to higher prices for food, beverages, and fresh produce. In Malaysia, the producer price index dropped 4.2% y-o-y in March to 125.1, with the local production index and import price index falling 5.9% and 0.3%, respectively.

*     In March, Indonesia recorded a trade surplus of US$305 million as a result of a bigger drop in exports than imports. The Republic of Korea posted a current account surplus of US$5.0 billion in March, nearly doubling the US$2.7 billion surplus in February. The current account surplus was driven by the trade surplus in goods, which rose to US$4.2 billion in March from US$2.6 billion a month earlier. Meanwhile, Thailand posted a current account surplus of US$1.9 billion in March, driven mainly by a trade surplus of US$2.0 billion.

*     In April, the People's Republic of China's (PRC) manufacturing purchasing managers' index (PMI) fell slightly to 50.6 from 50.9 in March, the seventh straight month with a reading above 50, indicating expansion. In Hong Kong, China, retail sales grew 9.8% y-o-y in March due to a large increase in department store sales. Japan's retail sales declined 0.3% y-o-y in March, the third monthly decline this year. At the same time, Japan's industrial production index rose in March for the fourth consecutive month by 0.2%; however, its industrial production fell 7.3% on a y-o-y basis.

*     In order to improve demand, the PRC's Ministry of Finance (MOF) and State Administration on Taxation jointly announced last week that companies and individuals will be exempt from paying taxes on the interest received from local government bonds issued after 2011. The tax exemption only applies to local government bonds issued by the MOF on behalf of a local government.

*     Total deposits in Hong Kong, China fell 1.0% m-o-m in March to the equivalent of HKD8.35 trillion. Total HKD deposits fell 0.8% m-o-m to HKD4.17 trillion, while CNH deposits rose 2.5% m-o-m to CNH668.1 billion. 

*     CNOOC last week issued US$4 billion in bonds. Demand was strong with orders reaching over US$23.8 billion. Most of the buyers were asset managers and US investors, who together purchased 80% of the issuance. The bonds carry a coupon of 3.0% and have a maturity of 10 years.   

*     Government bond yields fell last week for all tenors in the Republic of Korea, and for most tenors in the PRC; Hong Kong, China; Malaysia; the Philippines; Singapore; and Thailand. Yields rose for all tenors in Indonesia, and for most tenors in Viet Nam. Yield spreads between 2- and 10- year maturities widened in Indonesia, Malaysia, and Thailand, while spreads narrowed in most other East Asian markets.

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