AsianBondsOnline Newsletter (5 August 2013)

News Highlights - Week of 29 July - 2 August 2013

Inflation in Indonesia rose steeply in July to 8.6% year-on-year (y-o-y) from 5.9% in June. The full effects of the recent fuel price hike were felt in July, which coincided with the celebration of Ramadan to send prices higher. Consumer price inflation also accelerated in the Republic of Korea in July, as the inflation rate rose to 1.4% y-o-y from 1.0% in June. In Thailand, consumer price inflation moderated to 2.0% y-o-y in July from 2.3% in June. The price index for food and non-alcoholic beverages rose 2.8% y-o-y in July, while the price index for non-food and beverages climbed 1.6%.

*     The People's Republic of China's (PRC) Purchasing Managers' rose to 50.3 in July from 50.1 in June. In Japan, industrial production declined 3.3% month-on-month (m-o-m) and 4.8% y-o-y in June. According to the Singapore Institute of Purchasing and Materials Management, Singapore's overall PMI rose slightly to 51.8 in July from 51.7 in June. However, the PMI for the electronics sector fell to 50.3 in July from 51.2 in June. 

*     Retail sales growth in Hong Kong, China rose to 14.7% y-o-y in June from 12.9% in May.      Manufacturing production in the Republic of Korea posted a 0.4% m-o-m increase in June following a 0.1% decline in May. However, on a y-o-y basis, manufacturing production contracted 2.7% in June and 1.4% y-o-y in May. In Thailand, the seasonally adjusted manufacturing production index increased 0.9% m-o-m in June, an improvement from a gain of 0.6% in May. On a y-o-y basis, the index slipped 2.2% in June after contracting 8.6% in May.

*     Economic growth in Indonesia slowed to 5.8% y-o-y in 2Q13 compared with annual growth of 6.0% in 1Q13. Meanwhile, Indonesia's trade deficit widened in June to US$847 million from US$527 million. Exports from Indonesia fell 8.6% m-o-m and 4.5% y-o-y in June, due mainly to continued weakness in the global economy and declining export commodity prices. Imports fell 6.4% m-o-m and 6.8% y-o-y in June, partly due to weak domestic demand.

*     The Republic of Korea's current account surplus shrank to US$7.2 billion in June from US$8.6 billion in May. The monthly drop mainly stemmed from a 30.9% m-o-m fall in the trade surplus in goods, which leveled off at US$5.0 billion in June.

*     In Thailand, the current account deficit narrowed to US$664.3 million in June from US$1.1 billion in May.   

*     Fitch Ratings revised Malaysia's credit outlook to negative from stable, with the Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) affirmed at A- and A, respectively. The rating agency cited Malaysia's public finances as its key rating weakness and said that prospects have worsened for budgetary reform and fiscal consolidation.  

*     Baidu, a PRC-based internet service company, priced a US$1 billion bond last week. The coupon rate was set at 3.25% with a maturity of 5 years.     

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