Tuesday, August 12, 2014

AsianBondsOnline Newsletter (11 August 2014)


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News Highlights - Week of 4 - 8 August 2014

Annual inflation rate continued to decline in Indonesia, easing to 4.5% year-on-year (y-o-y) in July from 6.7% a month earlier, due to the normalization of the pass-through effects of reduced fuel subsidies last year. The July inflation level marked the first time since June 2013 that the inflation rate fell within Bank Indonesia’s 2013 and 2014 target range of 3.5%–5.5%. In the Philippines, consumer price inflation rose to 4.9% y-o-y in July, the highest level in 33 months, from 4.4% in May. The biggest contributions to the increase were a rise in the y-o-y prices of food and non-alcoholic beverages, as well as an uptick in utilities costs.      Meanwhile, the People’s Republic of China’s (PRC) consumer price inflation rate remained unchanged in July at 2.3% y-o-y, the same rate as in June.

*     Indonesia’s economy grew at 5.1% y-o-y in 2Q14, following revised 5.2% growth in 1Q14. The slower growth was due mainly to a contraction in export growth. Also, imports and government spending contracted 5.0% and 0.7%, respectively. Domestic consumption remained strong, climbing 5.6%, as did investments, which rose 4.5%. On a quarter-on-quarter (q-o-q) basis, the economy grew 2.5% in 2Q14.

*     The PRC’s non-manufacturing Purchasing Managers Index (PMI) fell to 54.2 in July from 55.0 in June. In Hong Kong, China, the HSBC PMI rose to 50.4 in July from 50.1 in June. In Singapore, the PMI rose to 51.5 in July from 50.5 in June.

*     The People’s Bank of China (PBOC) last week said that it would continue its targeted monetary policy in the second half of 2014.  Support would be given to rural areas and small- and medium-sized enterprises, including measures to help reduce borrowing costs.  Also, the PBOC said that it would seek to establish a deposit insurance scheme in the next few months and improve the monitoring of financial risks in certain key sectors and industries.

*     In its Monetary Policy Committee meeting held on 6 August, Bank of Thailand decided to keep its policy rate steady at 2.0%.

*     Exports from the PRC rose 14.5% y-o-y in July, due to a recovery in external demand, particularly in developed markets. Imports, on the other hand, fell 1.6% y-o-y during the same period. As a result, the trade surplus rose to US$47.3 billion from US$31.6 billion in June. Indonesia recorded a trade deficit of US$305 million in June, a turnaround from a trade surplus of US$53 million in May. Imports outpaced exports in anticipation of higher demand during Eid celebrations. In Malaysia, a trade surplus amounting to MYR4.0 billion was recorded in June.

*     Shanghai Electric last week priced a US$500 million 5-year Reg S bond at a yield of 3.045% and a coupon rate of 3.0%. Hong Kong, China launched its fourth series of inflation-linked bonds. The size of the bond was HKD10.0 billion and total orders reached HKD28.0 billion. The Export–Import Bank of Korea raised US$1.0 billion from a dual-tranche bond sale consisting of a US$500 million 5-year bond with a coupon of 2.375% and a US$500 million 12-year bond with a coupon of 3.25%.

*     Local currency government bond yields fell for all tenors in Hong Kong, China; and the Republic of Korea, and for most tenors in Malaysia, Singapore, and Viet Nam. Yields rose for all tenors in  Indonesia as economic data released last week pointed to a slowdown in growth, and a worsening trade balance. Yields rose for most tenors in the Philippines as inflation continued to climb in July. The spread between the 2- and 10-year maturities fell for most  markets except for the PRC, the Philippines, Thailand, and Viet Nam.

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