AsianBondsOnline Newsletter (24 November 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20141124.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 17 - 21 November 2014

Bank Indonesia’s Board of Governors convened for a second time in November to help strengthen its policy mix in response to the government’s decision to raise fuel prices. On 18 November, Bank Indonesia raised its benchmark rate by 25 basis points to 7.75% to help manage inflation expectations and keep inflationary pressures at bay.

*     Real gross domestic product (GDP) growth in Japan contracted 0.4% quarter-on-quarter (q-o-q) in 3Q14 following a revised contraction of 1.9% in the previous quarter. The contraction was mainly attributed to a 0.9% q-o-q decline in private demand, particularly private residential investment. In Thailand, real GDP growth accelerated to 0.6% year-on-year (y-o-y) in 3Q14 from 0.4% in 2Q14, buoyed by rising domestic demand and growth in non-agricultural production.

*     Japan’s export growth rose to 9.6% y-o-y in October—the most rapid growth in 8 months—from 6.9% in September. October’s export growth was led by cars, ships, and steel. Import growth, on the other hand, eased to 2.7% y-o-y from 6.2% in the previous month, translating to a narrower trade deficit of JPY710 billion. Singapore’s non-oil domestic exports (NODX) fell 1.5% y-o-y in October versus a 0.9% growth in September.  Both electronics and non-electronic exports recorded a y-o-y decline in October.

*     Hong Kong, China’s consumer prices rose at a slower pace in October, rising 5.2% y-o-y in October from 6.6% in September. The lower increase in October was due to a low-base effect that resulted in a higher inflation rate in September due to the government’s public housing rentals last year.  In Malaysia, consumer price inflation climbed to 2.8% y-o-y in October from 2.6% in September, driven by three major groups: food and non-alcoholic beverages (2.8%); transportation (5.3%); and housing, water, electricity, gas, and other fuels (3.4%). In the Republic of Korea, the Producer Price Index fell 0.6% month-on-month (m-o-m) and 0.7% y-o-y in October due to a decline in manufactured goods prices, which dropped 0.8% m-o-m and 2.4% y-o-y.

*     In the Philippines, personal remittances from overseas Filipinos rose 8.1% y-o-y in September to reach US$2.3 billion.

*     The Republic of Korea’s external debt fell to US$429.1 billion at end-September from US$442.2 billion at end-June, due to decreases in both short- and long-term external debt. Meanwhile, local currency corporate debt issuance rose 21.6% m-o-m to KRW12.9 trillion in October, largely driven by non-financial corporates, non-bank financial companies, and the issuance of asset-backed securities.

*     Last week, Moody’s Investors Service (Moody’s) reported that its Aa3 rating for the Republic of Korea is hinged on its “very high economic strength, institutional strength, and fiscal strength,” and that the economy’s external position is strong, led by its competitive export sector and large foreign exchange reserves. Moody’s also announced a stable outlook in 2015 for non-financial corporates.

*     Government bond yields fell last week for all tenors in Indonesia, and for most tenors in Hong Kong, China, Japan, the Republic of Korea, and Thailand. Yields rose for all tenors in the PRC, and Malaysia and for most tenors in the Philippines, Singapore and Viet Nam. The spread between the 2- and 10-year maturities narrowed in most markets in emerging East Asia except in the PRC, Thailand, and Viet Nam, while staying unchanged for Malaysia.

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