AsianBondsOnline Newsletter (4 August 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20140804.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

******************************************************************************

News Highlights - Week of 28 July - 1 August 2014

Bangko Sentral ng Pilipinas (BSP) raised its key policy rates by 25 basis points (bps) each last week, bringing the overnight reverse repurchase rate to 3.75% and the overnight repurchase rate to 5.75%. The central bank said that it raised rates to preempt rising inflation expectations amid increasing inflationary pressures. Current pressures are coming from elevated food prices, volatile oil prices, and pending rate adjustments in energy and transport prices. BSP also said that its move to increase interest rates comes in advance of expected monetary policy normalization in advanced economies.

*     Consumer price inflation in the Republic of Korea stood at 1.6% year-on-year (y-o-y) in July, down slightly from June’s inflation rate of 1.7%, amid slower y-o-y increases in food, housing, and utility costs, and a larger annual drop in transport costs. In Thailand, consumer price inflation moderated to 2.2% y-o-y in July from 2.4% in June, led by slower price hikes in non-food and beverages prices.

*     The People’s Republic of China’s (PRC) current account surplus rose in 2Q14 to US$72.2 billion dollars from US$7.2 billion in 1Q14.  The Republic of Korea’s current account surplus stood at US$7.9 billion in June, down from US$9.1 billion in May. Thailand’s current account balance shifted to a surplus of US$1.8 billion in June from a deficit of US$0.7 billion in May.

*     The PRC’s manufacturing activity picked up in July, as the manufacturing Purchasing Managers Index (PMI), rose to 51.7 from 51.0 in June. In the Republic of Korea, industrial production rebounded in June, rising 0.6% y-o-y after contracting 2.1% in May. Manufacturing production was up 0.4% y-o-y in June after falling 2.3% in May. Thailand’s manufacturing production contracted 6.6% y-o-y in June following a 4.0% drop in May. In Viet Nam, industrial production growth accelerated to 7.5% y-o-y in July from 6.1% in June.

*     Hong Kong, China’s retail sales fell 6.9% y-o-y in June from a revised 3.9% decline in May.  The decline in retail sales for July was mostly due to a dip in sales of high-value items.

*     The PRC’s Bank of Communications priced a securitized multi-tranche bond last week. The CNY2.0 billion A1 tranche has an expected maturity of 6 months. Its first coupon rate was priced to yield 5.0%. The CNY2.177 billion A2 tranche is expected to mature in April 2016 and was priced to yield 5.4%. The CNY358 million B tranche is expected to mature in October 2016 and its first coupon rate was set at 6.25%. There is also a CNY373.9 million subordinated tranche with no specific coupon and it is expected to mature in January 2018.    

*     International Finance Corporation (IFC) announced last week that it is planning to issue additional bonds via a tap of its existing CNH2.0 billion bond that matures in 2017 and carries a coupon of 2.0%. Indications are that the tap will be priced to yield 2.0%–2.1% and have a size of CNY750 million. In the PRC, Jingrui Holdings has set an indicated yield of roughly 14.0% for its planned Reg S bond, which will have a maturity of 5 years and be callable after 3 years.  The issue size is expected to be between US$150 million and US$200 million.

*     Yields changes were mostly mixed in most markets with the exception of Viet Nam, whose yield curve fell. However, the PRC and the Philippines, due to the hike in policy rates, had larger increases in yields at the shorter-end.The 2-year versus 10-year yield spreads rose for most markets except for the PRC, Malaysia, Philipines and Thailand.

******************************************************************************