AsianBondsOnline Newsletter (9 September 2013)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20130909.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 2 - 6 September 2013

Consumer price inflation in Indonesia remained high in August, rising to 8.8% year-on-year (y-o-y) in from 8.6% in July. On a month-on-month (m-o-m) basis, however, inflation eased to 1.1% m-o-m in August, following a 3.3% hike in July. In the Philippines, consumer price inflation decelerated to 2.1% y-o-y in August from 2.5% in July, mainly due to a deceleration in growth rate of the housing, water, electricity, and gas and other fuels index. Meanwhile, consumer price inflation in Thailand moderated to 1.6% y-o-y in August from 2.0% in July on the back of smaller price hikes for food and non-food items.

*     At its monetary policy meeting held on 5 September, the Bank of Japan (BOJ) announced that it would maintain its monetary easing measures amid a recovering economy and resilience in domestic demand. Meanwhile, Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate at 3.0%, the same level since May 2011, at its last Monetary Policy Committee meeting.

*     In the People's Republic of China (PRC), the trade surplus for August rose to US$28.6 billion from US$17.8 billion in July, due to higher export growth which accelerated to 7.2% y-o-y in August from 5.1% in July. Meanwhile, the PRC's consumer price inflation marginally eased to 2.6% y-o-y in August from 2.7% in July.

*     Based on preliminary estimates, real gross domestic product (GDP) growth in the Republic of Korea stood at 1.1% quarter-on-quarter (q-o-q) and 2.3% y-o-y in 2Q13. Singapore's Purchasing Managers Index (PMI) fell to 50.5 in August, compared with 51.8 in July. Meanwhile, the PRC's non-manufacturing PMI fell to 53.9 in August from 54.1 in July.

*     Malaysia reduced government subsidies on fuel prices for the first time since 2010. The move is expected to save the government MYR1.1 billion this year and MYR3.3 billion annually in future years.

*     Indonesia's trade deficit widened to US$2.3 billion in July from US$877 million a month ago, as a result of a 6.1% y-o-y decline in exports and a 6.5% increase in imports. Malaysia's exports increased 4.5% y-o-y in July to MYR60.7 billion after having fallen for 5 consecutive months.

*     According to the Financial Supervisory Service (FSS), foreign investment in local currency (LCY) bonds in the Republic of Korea fell in August, with net bond investment outflows amounting to KRW2.1 trillion for the month. This was the first time since February that foreign investors' net bond investment in the Republic of Korea turned negative. Investors based in the United States (US) continued to be the largest holders of LCY bonds in the Republic of Korea at KRW21.4 trillion as of end-August.

*     Last week, the government of the Republic of Korea priced US$1 billion worth of 10-year bonds at a coupon rate of 3.875%. Viet Nam Development Bank (VDB) offered VND4 trillion of government-backed bonds at auction last week - but managed to sell VND50 billion of 3-year bonds at 8.3% and VND40 billion of 5-year notes at 9.1%.

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