AsianBondsOnline Newsletter (15 July 2013)

News Highlights - Week of 8 - 12 July 2013

Last week, Bank Indonesia (BI) decided to raise its benchmark rate by 50 basis points (bps) to 6.5%. BI also raised its deposit facility rate by 50 bps to 4.75% and kept the lending facility rate steady at 6.75%. The Bank of Japan (BOJ) announced its plan to maintain its monetary easing measures, given that the economy is expected to recover moderately and inflation is expected to turn positive. Meanwhile, The Bank of Korea, Bank Negara Malaysia (BNM), and the Bank of Thailand (BOT) decided to keep their policy rates unchanged.

*     In June, exports from and imports to the People's Republic of China (PRC) fell 3.1% and 0.7% year-on-year (y-o-y), respectively. In May, Japan posted a JPY540 billion current account surplus for the fourth consecutive month, as income receipts from investments abroad outweighed the trade deficit. The Philippines' merchandise exports contracted 0.8% y-o-y in May to US$4.9 billion, due to continued weakness in the global economy.

*     Based on advance estimates, Singapore's economy grew 3.7% y-o-y in 2Q13, compared with 0.2% growth in the preceding quarter. Last week, The Bank of Korea revised upward its gross domestic product (GDP) growth outlook for 2013 to 2.8% from its previous forecast of 2.6% made in April. Meanwhile, the PRC's GDP slowed to 7.5% y-o-y in 2Q13, down from 7.7% in the previous quarter. In Malaysia, the Industrial Production Index continued to rise in May, increasing 3.4% y-o-y following April's revised 4.6% gain. In the PRC, consumer prices rose 2.7% y-o-y in June.

*     Last week, the Republic of Korea's Ministry of Strategy and Finance announced amendments to regulations on Korea Treasury Bond issuance and the primary dealer system, with the amendments aimed at attracting greater primary dealer participation in the primary market as well as in the secondary market.

*     Meanwhile, the Republic of Korea's Financial Services Commission announced measure to invigorate the country's corporate bond market and prevent the worsening of corporate funding conditions and the possible spillover of "destabilizing factors" from the market to the real economy.

*     The Ministry of Finance of the PRC announced last week that it would include Jiangsu and Shandong provinces in its pilot program allowing local governments to issue their own bonds.

*     Last week, the Indonesian government priced US$1 billion of 10-year bonds. The bonds are priced to yield 5.45% and carry a coupon of 5.375%. In Singapore, media group Singapore Press Holdings plans to raise at least SGD523 million by spinning off some of its property assets via a real estate investment trust.

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