Global financial markets were volatile after the conclusion of the United States (US) presidential election last week. Between 7 November and 11 November, US interest rates rose, with the 2-year

To read the full report, data and graphs go to http://asianbondsonline.adb.org/newsletters/abowdh20161114.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 7 - 11 November 2016

Global financial markets were volatile after the conclusion of  the United States (US) presidential election last week. Between 7 November and 11 November, US interest rates rose, with the 2-year bond yield rising 10 basis points (bps) and the 10-year yield rising 32 bps. The rise in yields was due to expectations that inflation and gross domestic product (GDP) growth will rise in the US given plans for increased spending and reduced income taxes. The US dollar strengthened against currencies in emerging East Asia, Japan, and Germany. Equities were even more volatile, with equity markets in emerging East Asia falling after the conclusion of the election before recovering the next day. By the end of the week, most equity markets in emerging East Asia had fallen again on concerns that US economic growth would not extend to Asia. Yields in most emerging East Asian bond markets also rose, tracking the rise in US yields.

*     Hong Kong, China’s GDP grew 1.9% year-on-year (y-o-y) in the third quarter (Q3) of 2016, up from 1.7% y-o-y growth in the second quarter (Q2) of 2016. The increase in the growth rate was driven by a recovery in investment and improved consumer spending. In Malaysia, GDP growth inched up to 4.3% y-o-y in Q3 2016 from 4.0% y-o-y in Q2 2016, mainly due to the accelerating increase in private consumption. In Indonesia, real GDP growth eased to 5.1% y-o-y in Q3 2016 from 5.2% y-o-y in Q2 2016 on a slowdown in government spending and continued weakness in exports.

*     In a meeting held on 11 November, the Monetary Policy Board of the Bank of Korea held steady its base rate at 1.25%. Bangko Sentral ng Pilipinas decided on 10 November to keep its overnight reverse repurchase rate at 3.0%. Interest rates on the overnight lending and deposit facilities were also maintained, as were the reserve requirement ratios. The Bank of Thailand’s Monetary Policy Committee decided on 9 November to keep the policy rate at 1.50% for the 12th consecutive time.

*     Industrial production growth in Malaysia slowed to 3.2% y-o-y in September from 4.9% y-o-y in August. The slower growth was driven by the 0.1% y-o-y contraction in the mining sector following an expansion of 4.3% y-o-y in August.

*     The People’s Republic of China’s (PRC) consumer prices rose 2.1% y-o-y in October, up from inflation of 1.9% y-o-y in September. The rise was mostly driven by food inflation, with food prices rising 3.7% y-o-y and nonfood prices rising 1.7% y-o-y. On the other hand, producer prices staged a recovery, rising 1.2% y-o-y in October, up from a 0.1% y-o-y gain in September.

*     In renminbi terms, the PRC’s exports declined 3.2% y-o-y and imports grew 3.2% y-o-y in October, resulting in a monthly trade surplus of CNY325.3 billion. Japan’s current account surplus narrowed to JPY1.8 trillion in September from JPY2.0 trillion in August. The Philippines’ exports rose 5.1% y-o-y in September to USD5.2 billion and imports increased 13.5% y-o-y to USD7.1 billion. The Philippines posted a trade deficit of USD1.9 billion in September.

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