AsianBondsOnline Newsletter (2 March 2015)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20150302.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 23 - 27 February 2015

Consumer prices in Hong Kong, China rose 4.1% year-on-year (y-o-y) in January following December’s price increase of 4.9% y-o-y. The items with prices rising the fastest were electricity, gas, and water (21.7% y-o-y); and housing (8.3% y-o-y). The government said that while inflation was down in January, it was partly due to the timing of the Lunar New Year, which was in January last year. In Japan, consumer price inflation remained unchanged at 2.4% y-o-y in January. Singapore recorded deflation for the third month in a row in January as consumer prices posted a 0.4% y-o-y decline following a 0.1% dip in December. The accelerating pace of deflation was due mainly to a steep decline in the prices of oil-related products as well as slower increases in food prices. The Monetary Authority of Singapore expects inflation to further slowdown in the first half of the year

*     The People’s Republic of China (PRC) reduced its key policy rates by 25 bps, bringing the 1-year benchmark lending rate to 5.35% and the benchmark 1-year deposit rate to 2.50%

*     Hong Kong, China’s gross domestic product (GDP) growth slowed to 2.2% y-o-y in 4Q14 from 2.7% y-o-y in the prior quarter. The lower growth rate was mostly due to slowing growth in goods exports, which rose 0.6% y-o-y in 4Q14 after a 1.0% y-o-y gain in 3Q14, and an uptick in the growth rate of goods imports to 1.2% y-o-y from 0.5% y-o-y over the same period. Private consumption growth also slowed to 3.8% y-o-y in 4Q14 from 4.1% y-o-y in 3Q14, and government expenditure growth slowed to 3.3% y-o-y from 3.7% y-o-y. Gross domestic capital formation growth rebounded to 4.0% y-o-y in 4Q14 from a 3.3% y-o-y decline in 3Q14. For the full-year 2014, GDP grew 2.3% after rising 2.9% in 2013.

*     Hong Kong, China’s exports grew 2.8% y-o-y in January after rising 0.6% y-o-y in December. Import growth also rose to 7.9% y-o-y from 1.9% y-o-y in the prior month. A trade deficit of HKD37 billion was recorded in January. The Republic of Korea's current account surplus slipped to US$6.9 billion in January from US$7.0 billion in December. The Philippines’ merchandise trade deficit narrowed to US$68 million in December from US$233 million in November. Thailand's current account surplus narrowed to US$2.5 billion in January from US$5.5 billion in December.

*     Industrial production in Japan increased 4.0% m-o-m in December, but declined 2.6% y-o-y. In Singapore, industrial production growth rebounded to 0.9% y-o-y in January after a             1.9% y-o-y decline a month earlier. Meanwhile, manufacturing production in Thailand posted a 1.3% y-o-y dip in January following a 0.1% y-o-y decline in December.

*     The Capital Market Supervisory Board approved the revision of investment rules governing mutual funds, provident funds, and private funds for retail investors to encourage investment in derivatives and structured notes.

*     Government bond yields fell in Indonesia, the Republic of Korea and Malaysia while falling for most tenors in the PRC, Philippines, Singapore, Thailand and Viet Nam.   The fall in yields for most markets was driven by Federal Reserve (Fed) Chairwoman Janet Yellen’s testimony to Congress that while the Fed could start to raise rates this year if the economy improves, the timing still largely depends on the performance of the economy.

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