AsianBondsOnline Newsletter (7 July 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20140707.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 30 June - 4 July 2014

Consumer price inflation in Indonesia decelerated to 6.7% year-on-year (y-o-y) in June from 7.2% in May, led by slower increase in  food prices. Consumer price inflation in the Republic of Korea stood at 1.7% y-o-y in June, the same rate of inflation as in May. In the Philippines, consumer price inflation eased to 4.4% y-o-y in June from 4.5% in May. In Thailand, consumer price inflation moderated to 2.4% y-o-y in June from 2.6% in May.

*     The Republic of Korea’s merchandise trade surplus stood at US$5.3 billion in June, about the same amount as in May but lower than the surplus of US$6.0 billion recorded a year earlier, as y-o-y growth in merchandise imports outpaced merchandise export growth.  Indonesia recorded a merchandise trade surplus of US$70 million in May, following a deficit of US$2.0 billion in April, as exports of goods rose 3.7% month-on-month (m-o-m) and merchandise imports fell 9.2% m-o-m. 

*     Thailand’s current account deficit widened to US$664 million in May from US$643 million in April despite a monthly increase in the country’s merchandise trade surplus. Merchandise exports rose at a faster pace in May, with m-o-m growth at 12.7% versus merchandise import growth of 6.7%. As a result, the trade surplus in goods widened by US$1.1 billion to US$1.6 billion in May.

*     The People’s Republic of China’s (PRC) Purchasing Managers Index (PMI) for manufacturing rose to a 6-month high of 51.0 in June from 50.9 in May. On the other hand, the PMI for non-manufacturing fell to 55.0 from 55.5 in the same period. Industrial production in Japan increased 0.5% m-o-m in and 0.8% y-o-y in May.

*     The PRC’s State Administration for Foreign Exchange (SAFE) announced that it would allow banks to set their own bid-ask prices for buying and selling renminbi against the US dollar with their banking clients. Prior to this, regulatory limits set a maximum spread of 3.0%.

*     In the Republic of Korea, the delinquency rate of domestic banks’ local currency (LCY)-denominated loans climbed to 1.0% at end-May from 0.9% at end-April, amid a monthly increase in newly-delinquent loans. Newly-delinquent loans climbed to KRW1.9 trillion.

*     The Sydney branch of the Bank of Communications issued a AUD350 million 3-year floating rate bond. The bonds were priced at the 3-month Bank Bill Swap Rates (BBSW) plus 134 basis points (bps). Indonesia raised EUR1.0 billion from its sale of 7-year bonds carrying a coupon rate of 2.875% last week. Korea National Oil Corporation last week raised US$800 million as it priced a US$550 million 10-year bond at a coupon rate of 3.25% and raised US$250 million from a tap of an existing US$500 million 5-year bond carrying a 2.75% coupon.

*     Hong Kong, China announced that it is planning a debut sukuk issuance in September, with a targeted size of between US$500 million and US$1.0 billion and a tenor of 5 years. The structure to be used is expected to follow the ijarah principle.

*     Government bond yields rose for all tenors in the PRC, Hong Kong, China, Philippines and Thailand.  Yields fell for most tenors in Indonesia and for all tenors in the Republic of Korea, due to lower inflation. Yields in Viet Nam and Malaysia  also fell for most tenors. The 2-year versus 10-year spread widened for most countries except for Indonesia, Malaysia and Thailand.

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