AsianBondsOnline Newsletter (15 June 2015)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20150615.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 8 - 12 June 2015

The Bank of Korea’s Monetary Policy Committee decided on 11 June to lower the base rate by 25 basis points to 1.50%. In its monetary policy decision, the committee took into account a sluggish export performance and the adverse impacts of the Middle East Respiratory Syndrome (MERS) on household consumption. On 10 June, the Bank of Thailand’s Monetary Policy Committee decided to keep its 1-day repurchase rate steady at its current level of 1.50%. The committee’s decision was based on softening economic momentum in January–April and continuing negative headline inflation.

*     Real gross domestic product (GDP) growth in Japan was revised upward to 1.0% quarter-on-quarter (q-o-q) in 1Q15 from a preliminary estimate of 0.6% q-o-q, and remained higher than the 0.3% q-o-q growth posted in 4Q14. The increase in 1Q15 was mainly due to a revised gain in domestic demand of 1.1% q-o-q compared with a preliminary estimate of 0.7% q-o-q. On an annualized basis, Japan’s real GDP grew 3.9% in 1Q15.

*     The People’s Republic of China’s (PRC) industrial output growth rose to 6.1% year-on-year (y-o-y) in May from 5.9% y-o-y in April. Industrial production growth in Malaysia decelerated to 4.0% y-o-y in April from revised 7.1% y-o-y growth in March on slower annual price increases in all sub-indices.

*     The PRC’s exports contracted 2.5% y-o-y and imports fell 17.6% y-o-y. A trade surplus amounting to US$59.5 billion was recorded in May. In the Philippines, export growth contracted 4.1% y-o-y in April after rising 2.1% y-o-y in March.

*     Japan’s current account surplus shrank to JPY1,326 billion in April from JPY2,795 billion in March, mainly due to a goods and services deficit in April of JPY671 billion compared with a surplus of JPY839 billion in March.

*     Consumer prices in the PRC rose 1.2% y-o-y in May, compared with a 1.5% y-o-y increase in April, driven mostly by lower food prices, On a month-on-month (m-o-m) basis, food prices fell 0.9% m-o-m in May.

*     Net foreign investment in the Republic of Korea’s local currency bond market rose to KRW3,197 billion in May from KRW143 billion in April on the back of increased bond purchases from Europe. According to data from the Financial Supervisory Service (FSS), the net bond purchases of European investors reached KRW2,135 billion in May. At end-May, United States (US) investors remained the largest foreign investor group in the Republic of Korea’s domestic bond market, accounting for 17.8% of total foreign bond holdings.

*     Indonesian financing firm Toyota Astra Financial Services raised IDR1,509 billion in a dual-tranche bond sale last week. The bonds consisted of IDR698 billion of 370-day bonds with a coupon of 8.50% and IDR811 billion of 3-year bonds with a coupon of 9.25%, issued at par. Mandiri Tunas Finance listed a 3-year bond worth IDR150 billion on the Indonesia Stock Exchange last week. The bond was issued at par and with a coupon of 9.75%.

*     Government bond yields rose for all tenors for Viet Nam and for most tenors in Indonesia and Malaysia, Yields dropped for most tenors in the Republic of Korea following a policy rate cut. Yields for most tenors also fell in Singapore. Yields were mixed for the PRC, Hong Kong, China; the Philippines, and Thailand. The spread between the 2- and 10-year maturities widened for all emerging East Asian markets except for Indonesia, the Republic of Korea, the Philippines, and Viet Nam.

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