AsianBondsOnline Newsletter (18 January 2015)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160118.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 11 - 15 January 2016

In its meeting on 13–14 January, Bank Indonesia’s Board of Governors decided to lower the benchmark interest rate by 25 basis points (bps) to 7.25%. Both the deposit facility rate and the lending facility rate were also reduced by 25 bps to 5.25% and 7.75%, respectively. The rate cut was consistent with Bank Indonesia’s view that there is sufficient room for monetary easing given current macroeconomic conditions and also takes into account the United States (US) Federal Reserve rate hike. The Bank of Korea’s Monetary Policy Board decided on 14 January to keep the base rate unchanged at 1.50%. In its monetary policy decision, the board assessed recent developments in the global economy—including a sustained US economic recovery, the eurozone’s ongoing “modest improvements,” and the continued slowdown in emerging market economies.

*     The Bank of Korea announced last week that it has revised downward its 2016 consumer price inflation forecast for the Republic of Korea to 1.4% from an earlier projection of 1.7% made in October. In addition, its gross domestic product growth forecast for full-year 2015 was revised downward to 2.6% from 2.7%.

*     Industrial production growth in Malaysia eased to 1.8% year-on-year (y-o-y) in November from 4.2% y-o-y in October. The lower growth was driven by a larger annual decrease in the mining index of –4.1% in November compared with –1.4% in October.

*     The People’s Republic of China’s (PRC) exports fell 1.4% y-o-y in December while imports contracted 7.6% y-o-y. A trade surplus of US$60.1 billion was recorded in December. In Indonesia, exports declined 17.7% y-o-y and imports contracted 16.0% y-o-y in December. In the Philippines, merchandise exports contracted 1.1% y-o-y to US$5.1 billion in November, due to y-o-y decreases in exports of five major commodity product categories.

*     Japan’s current account surplus narrowed to JPY1.1 trillion in November from JPY1.5 trillion in October, mainly due to a reversal in the goods account to a deficit of JPY272 billion from a surplus of JPY200 billion.

*     On 11 January, Moody’s Investors Service affirmed its A3 sovereign credit rating for Malaysia and revised its outlook to stable from positive.

*     Foreign investors sold a net KRW784 billion worth of listed bonds in the Republic of Korea in December, a reversal from net bond investment inflows of KRW69 billion in November, according to data from the Financial Supervisory Service. At the end of 2015, investors in the US remained the largest holder of Korean bonds, totaling KRW18,094 billion, followed by PRC investors at KRW17,428 billion.

*     Woori Bank, based in the Republic of Korea, priced a US$500 million 5.5-year bond on a 2.625% coupon to yield 2.704% last week. DBS Group priced its first Basel III-compliant Tier 2 notes amounting to SGD250 million with a 12-year maturity. The bonds carry a fixed rate of 3.8% and are callable in 2023.

*     Local currency government bond yields fell for all tenors in Indonesia after the policy rate cut announced last week, and for the Republic of Korea and Thailand. Bonds yields fell for most tenors in Singapore following movements in US treasury rates, and for the PRC. On the other hand, yields rose for most tenors in the Philippines, and Viet Nam, while yields were mixed for Hong Kong, China, and Malaysia. The yield spread between the 2- and 10-year bond yields narrowed for most emerging East Asian markets except for Indonesia, the Philippines, and Viet Nam.

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