AsianBondsOnline Newsletter (17 August 2015)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20150817.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 10 - 14 August 2015

The People's Republic of China (PRC) reformed the exchange rate mechanism by which the renminbi central parity rate is set. Effective 11 August, the People's Bank of China (PBOC) declared that the central parity rate that market makers submit should be based on the prior closing of the interbank foreign exchange market, along with current demand and supply conditions. As a result of the move, the PRC’s central parity exchange rate declined by 1.9% on the first day it was implemented, 1.6% the second day, and 1.1% on the third day. Meanwhile, on 12 August, the State Bank of Viet Nam widened the exchange rate trading band for the Vietnamese dong to as much as ±2% from ±1% previously. As a result, the new VND–US$ exchange ceiling rate was set at VND22,106 per dollar and the floor exchange rate at VND21,240 per dollar.

*     Hong Kong, China’s gross domestic product (GDP) grew 2.8% year-on year (y-o-y) in 2Q15 from 2.4% in 1Q15 due to   stronger domestic consumption. Japan's GDP growth contracted at an annual rate of 1.6% in 2Q15 following a 4.5% expansion in the earlier quarter. Malaysia’s GDP growth slowed to 4.9% y-o-y in 2Q15 from 5.6% y-o-y in 1Q15, due to weaker private final consumption expenditure and gross fixed capital formation, and a contraction in exports. In 2Q15, Singapore’s GDP growth moderated to 1.8% y-o-y from 2.8% y-o-y in 1Q15.

*     Industrial production growth in the PRC eased to 6.0% y-o-y in July, due to a slowdown in the manufacturing sector. In Malaysia, industrial production growth slightly eased to 4.3% y-o-y in June from 4.5% y-o-y in May.

*     The Bank of Korea’s Monetary Policy Committee decided on 13 August to keep the base rate steady at 1.50%, given the committee’s assessment of global economic trends. In the Philippines, the Bangko Sentral ng Pilipinas decided on 13 August to keep policy rates unchanged at 4.00% for the overnight borrowing rate and 6.00% for the overnight lending facility.

*     Indonesia's current account deficit widened to US$4.5 billion (2.1% of GDP) in 2Q15 compared with a current account deficit of US$4.1 billion (1.9% of GDP) in 1Q15. In Japan, the current account surplus narrowed to JPY559 billion in June from JPY1.9 trillion in May.

*     The PRC’s exports fell 8.3% y-o-y in July, driven by lower demand from advanced economies. In the Philippines, merchandise exports contracted 3.3% y-o-y in June.               

*    Singapore’s retail sales grew 6.9% y-o-y in June following a 5.9% y-o-y increase in May. The rise was largely due to an 85.2% y-o-y surge in sales of motor vehicles.

*     Thailand’s public debt fell to THB5,684.5 billion, or 42.4% of GDP, at end-June from THB5,687.0 billion, or 42.6% of GDP, at end-May, according to the latest public debt data from the Public Debt Management Office.

*     Government bond yields rose last week for all tenors in Malaysia and Viet Nam and for most tenors in Hong Kong, China; and Indonesia. Yields fell for all tenors in the PRC, except for the 3-year tenor which was left unchanged; and for all tenors in the Republic of Korea. Meanwhile, yields fell for most tenors in Thailand and the Philippines. Yield movements were mixed in Singapore. The yield spreads between the 2- year and the 10-year tenors narrowed for all markets except the PRC; Hong Kong, China; Indonesia; and the Philippines.

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