The PRC last week approved a pilot program allowing local governments to issue revenue bonds. Under the program, local governments will issue bonds backed by revenue-generating projects. The PRC’s Ministry of Finance said that the bonds will help meet local government’s demand for capital and provide private financing for public programs.

To read the full report, data and graphs go to http://asianbondsonline.adb.org/newsletters/abowdh20170807.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 31 July - 4 August 2017

Consumer price inflation in Indonesia eased to 3.9% year-on-year (y-o-y) in July from 4.4% y-o-y a month earlier. On a month-on-month (m-o-m) basis, inflation slowed to 0.2%, due largely to slower increases in administered prices (0.1% m-o-m) and volatile food group prices (0.2% m-o-m). Consumer price inflation in the Republic of Korea rose to 2.2% y-o-y in July from 1.9% y-o-y in June as 7 out of 12 commodity groups posted higher annual increases. In the Philippines, consumer price inflation climbed to 2.8% y-o-y in July from 2.7% y-o-y in June. In Thailand, consumer price inflation rose to 0.2% y-o-y in July after posting deflation for 2 consecutive months (0.05% y-o-y in June and 0.04% y-o-y in May).

*     The People’s Republic of China’s (PRC) manufacturing Purchasing Managers’ Index (PMI) fell to 51.4 in July from 51.7 in June. The nonmanufacturing PMI also fell, declining to 54.5 in July from 54.9 in June. In Singapore, the PMI in July recorded a reading of 51.0, up marginally from a reading of 50.9 recorded in June.

*     Industrial production in Japan rose 1.6% m-o-m in June following a 3.6% m-o-m contraction in May, according to preliminary data from the Ministry of Economy, Trade, and Industry. On a y-o-y basis, industrial production in Japan rose 4.9%. In Viet Nam, industrial production rose 8.1% y-o-y in July, compared with an 8.6% y-o-y expansion in June.

*     The Republic of Korea’s exports surged 19.5% y-o-y in July to USD48.9 billion and imports rose 14.5% y-o-y to USD38.2 billion, resulting in a trade surplus of USD10.6 billion in July. Malaysia’s exports reached MYR73.1 billion in June on 10.0% y-o-y growth and imports reached MYR63.2 billion on growth of 3.7% y-o-y. Malaysia registered a wider trade surplus of MYR9.9 billion in June. In Thailand, merchandise exports grew 7.6% y-o-y in June and merchandise imports grew 12.8% y-o-y. Thailand's trade surplus reached USD2.9 billion in June.

*     The Republic of Korea’s current account surplus widened to USD7.0 billion in June from USD5.9 billion in May, led by a rise in the goods account surplus to USD9.7 billion from USD8.8 billion as exports rose faster than imports in June on a m-o-m basis. For the first half of 2017, the Republic of Korea posted a current account surplus of USD36.3 billion.

*     The PRC last week approved a pilot program allowing local governments to issue revenue bonds. Under the program, local governments will issue bonds backed by revenue-generating projects. The PRC’s Ministry of Finance said that the bonds will help meet local government’s demand for capital and provide private financing for public programs. 

*     China Chengtong Holdings Group issued a USD500 million 5-year bond at a coupon rate of 3.625% and a yield of 3.638%. Sunac China Holdings also issued a USD400 million 3-year bond at a yield of 7.25% and a USD600 million 5-year bond, callable after 3 years, at a yield of 8.2%. The 3-year bond carries a coupon rate of 6.875% and the 5-year bond carries a coupon rate of 7.95%.

*     Local currency government bond yields rose last week for most tenors in the People’s Republic of China; Hong Kong, China; the Republic of Korea, Malaysia and Singapore, while it declined for most tenors in Indonesia, Philippines, Thailand and Viet Nam. Yield spreads between 2-year and 10-year maturities widened for most East Asian markets except for Indonesia, Philippines and Thailand.

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