Tuesday, November 18, 2014

AsianBondsOnline Newsletter (17 November 2014)



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News Highlights - Week of 10 - 14 November 2014

Hong Kong, China’s gross domestic product (GDP) growth rose to 2.7% year-on-year (y-o-y) in 3Q14 from 1.8% in 2Q14. The improvement in GDP growth was driven by private consumption expenditure and net services exports. Private consumption expenditure rose 3.2% y-o-y in 3Q14 versus 1.2% in the prior quarter, and growth in services exports rebounded to 2.0% y-o-y in 3Q14 from –2.0% in 2Q14. In Malaysia, real GDP growth slowed to 5.6% y-o-y in 3Q14 from 6.5% y-o-y in the previous quarter. The easing expansion was mainly due to slower y-o-y growth in the services (6.1% from 6.2%), manufacturing (5.3% from 7.3%), and construction (9.6% from 9.9%) sectors.   

*     The People’s Republic of China’s (PRC) industrial production growth rate fell to 7.7% y-o-y in October from 8.0% in September. In Malaysia, industrial production growth slowed to 5.4% y-o-y in September from 6.5% in August as manufacturing and electricity output growth eased.

*     Last week, key policy rates were held steady in Indonesia (7.5%) and the Republic of Korea (2.0%).

*     Indonesia’s current account deficit narrowed to US$6.8 billion (equivalent to 3.1% of GDP) in 3Q14 from US$8.7 billion (equivalent to 4.1% of GDP) in the previous quarter. In Malaysia, the current account surplus declined  to MYR7.6 billion in 3Q14 from a surplus of MYR16.0 billion posted in 2Q14. Meanwhile, merchandise exports from the Philippines increased 15.7% y-o-y to US$5.8 billion in September.

*     Last week, Bank Negara Malaysia and the People’s Bank of China signed a memorandum of understanding (MOU) regarding the establishment of renminbi clearing services in Malaysia. Under the MOU, both central banks agreed to work together on the regulation of renminbi trading in Malaysia. The MOU is a first step in the establishment of an official renminbi clearing bank in Malaysia.

*     On 13 November, Fitch Ratings affirmed Indonesia’s sovereign credit ratings at BBB–.  The outlook on the rating is stable.

*     Foreign net bond investment in the Republic of Korea climbed to KRW1.3 trillion in October from KRW0.5 trillion in September on the back of bond purchases by investors from Asia and Europe, according to Financial Supervisory Service data released last week. By country of investor, France recorded the largest net bond investment inflows for the month of October at KRW0.5 trillion, followed by Singapore at KRW0.2 trillion. In contrast, the United States (US) posted the largest net bond outflows at KRW0.3 trillion in October. 

*     ICICI Bank last week issued a 3-year dim sum bond at a coupon rate of 4.0% and a size of CNY600 million. Bank of East Asia last week announced that it will issue a Basel III-compliant Tier 2 bond with a maturity of 10 years (non-callable in the first 5 years). The planned issue size is US$500 million.

*    Government bond yields rose last week for all tenors in the Republic of Korea, Malaysia, and Viet Nam. In the Republic of Korea, the policy rate was held steady, while Malaysian yields tracked US bond yield movements. Yields fell for all tenors in Hong Kong, China and for most tenors in Indonesia and Thailand, while yields were mixed in the PRC, the Philippines, and Singapore. The spread between the 2- and 10-year maturities narrowed in Indonesia, the Philippines, Singapore, and Viet Nam, while widening for most other markets in emerging East Asia.

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